House approves package of income tax exemptions, credits and military retirement exclusion; sends amendments to Senate

Rep. Kimball, the member from Woodstock and the Ways and Means Committee's reporter, presented a strike‑all amendment to Senate Bill 51 on behalf of the committee and asked the House to propose the committee's changes to the Senate.

The amendment would rename S.51 “an act relating to Vermont income tax exclusions and tax credits,” expand several refundable tax credits, raise income thresholds for certain retirement income exemptions, broaden a military retirement exemption and establish a $250 refundable Vermont veteran tax credit for low‑income veterans.

"Tax credits are an important part of that system," Rep. Kimball said, describing the committee's effort to both raise revenue where needed and target relief to low‑ and moderate‑income Vermonters. The Ways and Means Committee reported the strike‑all amendment with a supportive committee vote and posted a fiscal note dated May 5 on the Joint Fiscal Office site.

The amendment would: increase the earned income tax credit (EITC) for filers without children to 100% of the federal amount (raising the maximum benefit for that group from $247 to $649); increase the Vermont child tax credit eligibility by raising the qualifying age from 5 to 6; raise income thresholds for exempting Social Security and certain federal retirement income; allow a graduated 100% exemption of military retirement pay (phasing out between $125,000 and $175,000 of adjusted gross income) and exempt military survivor benefits; and create a $250 refundable Vermont veteran tax credit phased out between $25,000 and $30,000 of AGI.

The Joint Fiscal Office figures quoted during debate included an overall package impact of about $13.5 million in foregone revenue for the combined credits and exemptions. The committee and presenters cited the JFO estimates for component impacts: about $3 million for expanding the EITC without children, about $4.5 million for the child‑credit age change, about $2.1 million for the Social Security/retirement threshold increases, about $2.5 million for the military retirement and survivor exemptions, and about $1.4 million for the new veteran credit. Rep. Kimball said JFO estimated roughly 1,583 military retirees would qualify for a full exemption and 627 for a partial exemption under the proposal.

Members debated the bill’s policy and fiscal tradeoffs. Rep. Fairhaven argued the refundable credits put money into Vermonters' pockets and read economic testimony supporting the military retirement exemption as a workforce and economic development tool. Rep. Weitzfield questioned whether data exist showing that retirees commonly pursue a second career after military retirement; Rep. Kimball answered that committee staff did not have a crosswalk showing how many retirees are employed after retirement.

Other members framed the military retirement exemption as a workforce recruitment tool and as recognition of service. Rep. Hultene and others said they have repeatedly advanced similar exemptions in prior years. One member explained a no vote by citing concern about potential federal Medicaid cuts and the effect of lost revenue on suicide prevention funding.

When the House called the roll on whether to propose to the Senate to amend S.51 as recommended by Ways and Means, the clerk recorded 142 votes in favor. The Speaker announced the ayes had it and that the House had proposed the committee amendments to the Senate; third reading was then ordered.

Votes and next steps: the House voted to propose the Ways and Means amendments to S.51 and moved the bill to third reading; the House's action will be messaged to the Senate for consideration.