Governor's budget includes $13.5 million individual tax‑relief package; expands child credit, EITC, Social Security and military pay exemptions

Tax Commissioner Craig Volley told the committee that the governor's recommended budget, released yesterday, includes a $13.5 million package of individual tax relief intended to ease costs for working families and retirees.

The package would expand four existing credits or exemptions, Volley said: raise the eligible age for Vermont's refundable child tax credit from 5 to 6; increase the state earned income tax credit (EITC) for filers without dependents from 38% of the federal credit to 100%; raise the thresholds for the state's Social Security income tax exemption by $5,000 for single and joint filers; and further exempt military retirement pay and survivor benefits. Volley said the proposals build on programs already on the books and aim to reduce poverty, support workforce participation and help seniors retain more income.

“The governor's budget proposes this 13 and a half million dollar individual tax relief package that’s aimed at keeping more money in the pockets of working‑class Vermonters and retirees,” Volley said.

Details and estimated fiscal effects given by Volley in the briefing: - Child tax credit: Increase the eligible age from 5 to 6. Volley estimated the change would affect about 36,100 filers and provide roughly $4.5 million in tax relief, bringing the program's total estimated tax expenditure to just under $30 million. - Earned income tax credit: Raise the Vermont EITC for claimants without dependents from 38% to 100% of the federal credit. Volley estimated this component would cost about $3.0 million and affect roughly 13,600 filers. - Social Security exemption: Increase the state exemption thresholds by $5,000 (thresholds were last changed in 2022). Volley estimated the change would cost about $2.1 million and affect about 83,100 filers. - Military retirement and survivor benefits: The governor proposes a broader exemption for military retirement pay and survivor benefits. Volley reported an estimated fiscal cost of about $3.9 million.

Volley noted there is overlap among beneficiaries of these measures — a single taxpayer could qualify for more than one of the credits or exemptions — so the figure of “just under 30,000 impacted filers” mentioned earlier in the briefing does not represent unique taxpayers across all changes.

Volley also summarized a separate change to the downtown and village center tax credit program: raising the program cap from $3 million to $5 million, which state officials view as a way to spur private investment in rehabilitating commercial buildings and rentals. He deferred programmatic details to Agency of Commerce and Community Development staff.

Committee members asked technical and administrative questions during the briefing, including whether the Social Security thresholds would be indexed (Volley: the proposal does not index them) and whether expanding the child credit to age 6 could be targeted to children not enrolled in public school (Volley: administratively complex; current rule looks at age on Dec. 31).

Volley cautioned that enactment and exact uses remain subject to the legislative appropriation process and that some elements — for example, broader exemptions for federal pensions and the interaction with other state exemptions — carry legal and budgetary questions that committees and JFO (Joint Fiscal Office) analysis will need to resolve.

The committee did not take a formal vote on any tax bill at this briefing; Volley said the proposals would be included in the governor's miscellaneous tax bill or other legislative vehicles and would be subject to the usual committee and appropriation processes.