Gov. Phil Scott signed a tax cut package into law Friday that will send $1,000 for every child 5 and under to Vermont households making $125,000 or less.
With federal stimulus spending flooding the state’s economy and boosting tax receipts, the Democrat-controlled Legislature and Republican governor agreed on something they are usually at odds over: cutting taxes.
Still, the parties spent months negotiating between competing visions, and a final compromise was not inked until the last day of the legislative session earlier this month.
The House initially sought to spend nearly $50 million, almost entirely dedicated to the child tax credit alone. The Senate responded with a $36 million package, only $22.5 million of which would have gone to the child tax credit. Anxious that a downturn in the economy could be on the horizon, the upper chamber had also proposed sunsetting the package’s major tax breaks after three years.
The final version of H.510 will spend $40 million, the bulk of which — $32 million — will pay for the child tax credit, which is estimated would benefit over 30,000 children. The sunset provision has also been removed.
Families claiming the child tax credit would lose $20 per $1,000 over the threshold their income is.
“Tax relief has always been my priority, but instead I’ve had to resort to preventing efforts to raise taxes over the last six years, so I’m encouraged the Legislature agreed with me this session that Vermonters need a break,” Scott said in a statement Friday.
“Although the proposals I put forward would have helped a broader cross-section of taxpayers, such as working families, low-income households, seniors on fixed incomes and students, while also helping to recruit and retain needed workers, and more, this bill is a step in the right direction,” he continued.
The bill signed Friday also includes tax relief for low-income workers, caregivers, student loan payers, retirees and those receiving military pensions, although not to the extent that Scott had proposed.
In particular, the governor has long sought a full exemption on military retirement pay from state income taxes. Lawmakers ultimately opted to exempt just $10,000 in military pensions, subject to income thresholds ($50,000 for individuals, $65,000 for a household.)
Vermont’s new child tax credit is modeled on a federal credit that was temporarily expanded during the pandemic to send an extra $3,600 to most parents for every child 6 and under. The payments were widely credited with lifting millions of children out of poverty — although for only as long as the cash transfers continued.
President Biden and congressional Democrats attempted to make the tax credit expansion permanent as part of the Build Back Better package, but failed when the provision ran into opposition from U.S. Sen. Joe Manchin, D-W.Va.
In a statement, House Speaker Jill Krowinski, D-Burlington, called the tax package “historic,” adding that it “wouldn't have been possible without the leadership and vision” of outgoing Rep. Janet Ancel, D-Calais, the longtime chair of the tax-writing House Ways and Means Committee.
“This is a huge win for Vermonters and I’m proud we were able to pass legislation that will provide financial support to families and individuals across all 14 counties,” Krowinski wrote. “We will continue to do the work to ensure communities across the state recover from the pandemic stronger than ever and no Vermonter is left behind.”
Also on Friday, Scott signed the following bills into law:
- H.515, An act relating to banking, insurance and securities
- H.517, An act relating to educational benefits for members of the military and their families and eligibility for election to serve as adjutant and inspector general
- H.533, An act relating to forfeited property disposition and a study assessing civil and criminal seizure and forfeiture of property in drug-related offenses
- H.546, An act relating to racial justice statistics
- H.551, An act relating to prohibiting racially and religiously restrictive covenants in deeds
- H.559, An act relating to workers’ compensation
- H.626, An act relating to the sale, use, or application of neonicotinoid pesticides
- H.697, An act relating to eligibility of reserve forestland for enrollment in the Use Value Appraisal Program
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