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Staff outline governor's proposed changes to child tax credit, EITC and Social Security exemption
Summary
Committee staff summarized three proposed personal-income tax changes in the governor’s recommended budget — raising the child tax credit age limit, changing the EITC rate for taxpayers without children, and increasing the Social Security exemption threshold — with estimated fiscal impacts and data on current claimant characteristics.
A staff tax-policy presenter briefed the House Ways & Means Committee on Feb. 5 about three personal-income tax provisions in the governor’s recommended budget: an expansion of the state child tax credit, a change in the state Earned Income Tax Credit (EITC) formula for claimants without dependents, and a modest increase in the state Social Security income exemption.
Child tax credit: The presenter told the committee the state child tax credit is a $1,000 refundable credit per eligible child and is currently available to filers with qualifying dependents age 5 and younger. “If you are earning below 175,000 and you've got kids, ages 5 or younger, you can claim this credit,” the staff member said, summarizing current eligibility rules. The governor’s proposal would raise the age of eligibility from 5 to 6. The presenter said the existing program is estimated in the tax-expenditure report to cost roughly $24,000,000 in tax expenditures and that the age change would raise the cost to about $28,500,000.
EITC change for taxpayers without children: The presenter reviewed how Vermont’s state EITC is tied to the federal EITC (Vermont’s rate was described as a percentage of the federal credit). The proposed change would increase the state’s percentage for claimants without children (the presenter described setting that percentage “up to a hundred” of the federal amount) while other claimants’ rates would remain unchanged. The presenter estimated that change would cost about $3,000,000 annually. Committee members were shown data the staff compiled on claimant demographics, filing methods, and overlap between EITC and the child tax credit.
Social Security exemption: The presenter described the existing state Social Security exemption (a graduated exemption that phases out: single filers currently have a full exemption at AGI up to $50,000 and a phase-out through $60,000; married filers have higher thresholds). The governor’s proposal would raise those AGI thresholds by $5,000, producing an estimated $2,100,000 annual cost. The staffer explained how federal definitions of “combined income” and taxable Social Security benefits interact with state AGI and the state exemption calculation.
Data and administration: The presenter said about 21,000 returns claimed the state child tax credit in tax year 2022 (covering roughly 27,000 children) and that most claimants file electronically; a small share use IRS Volunteer Income Tax Assistance (VITA) sites. The committee was told that Vermont’s approach — where the state credit is a percentage of the federal EITC — means changes at the federal level flow directly into Vermont calculations.
Next steps and questions: Committee members asked about claimant outreach and whether eligible but nonfiling households receive credits. The presenter said filing is required to claim the credits and noted existing programs such as VITA that help low-income taxpayers file. The presenter also noted that demographic trends (fewer very young children in the population, more retirees) could affect future costs for different credits and exemptions.
Ending: The staffer asked members to consider the fiscal estimates as they work through the governor’s proposals and to coordinate review with Joint Fiscal Office and the tax department for technical follow-up.
