Ways & Means reviews S.51 competing tax proposals: Senate caregiver credit vs. House package of child, EITC, retirement and veterans changes

At a Ways & Means briefing, staff reviewed competing versions of S.51 that would change Vermont tax credits and exemptions, highlighting different policy priorities and budget impacts.

The Senate-passed S.51 as described to the committee would create a refundable unpaid caregiver tax credit of up to $1,000 for resident or part-year resident individuals who provide at least 20 hours per week of uncompensated care. The credit would be prorated by month, require that the care recipient be related by blood, marriage or adoption and need assistance with activities of daily living or have a medical diagnosis, and would include an AGI-based phaseout that begins for individuals with adjusted gross income over $25,000. Staff said the Department of Taxes could require documentation, including a form from a medical professional, to check compliance. The Senate estimate for this single caregiver credit was about $6,000,000 in foregone revenue.

The House proposal of amendment to S.51, as reviewed, removes the unpaid caregiver credit and repackages tax changes drawn from H.135 (the miscellaneous tax bill) and administration proposals. Major elements in the House package discussed by staff include: raising the qualifying age in the Vermont child tax credit from 5 to 6; allowing childless filers to claim 100% of the federal Earned Income Tax Credit (EITC) while preserving the existing 38% calculation for filers with qualifying children; across-the-board $5,000 increases to the AGI thresholds that determine partial exclusions for retirement income (including Social Security and Civil Service Retirement System benefits); expanding retirement income exclusions to include U.S. military survivor benefits and substantially increasing the military-retirement exclusion with a full exclusion for taxpayers with AGI at or below $125,000 and a phased reduction above that level; and a refundable Vermont veteran credit of up to $250 with a phaseout discussed around $25,000–$30,000 AGI. Pat, a staff presenter, said the House package as described would total roughly $13,500,000 in revenue reductions and therefore fits within the budget framework staff reported.

Staff discussed administrative and policy trade-offs. The unpaid caregiver credit raises compliance and administrative concerns for the Department of Taxes, staff said, because it would require new definitions and verification processes; that was one reason the caregiver credit was removed from the House amendment. On the EITC change, staff explained that although raising the percentage for claimants without qualifying children is a large relative increase, the dollar impact is smaller because the federal credit limits and eligibility thresholds for childless filers are much lower. Staff also noted the state temporarily expanded EITC rules in 2021–22 at the federal level, which produced higher payments in those years.

Committee members asked for additional detail and data. Staff offered to circulate further analysis — including historical EITC claim and payment counts — and suggested the group could schedule a follow-up discussion later in the week. No formal motions or votes occurred during this briefing.

Next steps: staff will provide additional information on EITC claimant counts and administrative implications for the unpaid caregiver credit, and the committee may revisit the package at a later meeting.