Committee reviews proposed EITC expansion, child tax credit age increase and retirement exemptions

Pat Titterton of the Joint Fiscal Office told the Ways & Means Committee the governor's proposal in Committee Bill 25,090 would expand three existing personal-income tax provisions: raise the child tax credit eligibility age to 6, increase the state's earned income tax credit (EITC) percentage for filers without dependents, and bump Social Security income thresholds (and related civil-service-retirement benefits) by $5,000.

Titterton said Vermont's EITC is set as a percentage of the federal credit under chapter 32 of state statute and that the proposed change would increase the percentage for individuals claiming the credit without children from 38% to 100%. He estimated that change would raise foregone revenue by about $3,000,000 per year and bring total EITC-related foregone revenue in the state to roughly $30,000,000 annually. "Pay really close attention to what they're doing in Washington," he said, warning federal changes could flow directly into Vermont because the state ties the credit to federal definitions.

Nut graf: The committee heard technical explanation and context for the proposed expansions and for companion changes to retirement-income exemptions. Staff framed the bill as incremental changes to an existing system that remains tightly coupled to federal law; members pressed for data on who would benefit and how federal changes could alter Vermont costs.

Why it matters: The EITC and child tax credit are among the largest income-tax expenditures in Vermont; changes affect low-income working Vermonters, budget estimates, and the state's fiscal exposure to federal tax-law changes.

Key mechanics and fiscal context Titterton explained Vermont's state EITC is a flat percentage of the federal credit so federal eligibility and amounts pass through directly. He reviewed a history of recent percentage changes (from 32% to 36% to 38% in recent years) and showed charts illustrating that federal expansions (for example, 2021 pandemic measures) directly increased state expenditures and, when temporary, produced a later reduction. He said the proposed change for filers without dependents would increase participation in number of claimants but, because maximum credit amounts for filers without dependents are much lower than for filers with children, the dollar cost is modest relative to the total EITC program.

Committee members asked whether Vermont could "delink" from federal definitions so state credits would not automatically follow federal changes. Titterton said states can delink but doing so adds complexity, explaining that in past federal changes the state created its own statutory definitions and inflation adjusters; he deferred operational questions about the exact mechanics to a tax-department staffer identified in the meeting as Kirby.

Retirement exemptions and other proposals Titterton also reviewed two other elements in the package: increasing income thresholds for the Social Security exemption by $5,000 (he and staff estimated roughly $2.1M in additional foregone revenue) and a clarification about military retirement benefits exemptions. He described the existing statutory choice: filers who are eligible for both the Social Security exemption and the military retirement exemption must choose one when they file Vermont tax returns. A committee member asked whether a veteran could take the military exemption until age 65 and then switch to the Social Security exemption; the committee was told that switching when advantageous is allowed.

Questions and follow-up requested Members pressed for claimant-level detail. One member asked whether an increase in the age threshold for Social Security from 50 to 55 would meaningfully affect the number of people covered; Titterton said he did not have that specific split on hand but could provide it. Committee members repeatedly asked staff to model how federal changes would flow through Vermont's linked system and to identify how many Vermonters would see meaningful benefit from each change.

Ending: Staff provided follow-up commitments: obtain claimant counts by narrower age bands for Social Security exclusions, clarify mechanics for delinking from federal credits, and supply the committee with the background charts used in the presentation.