At a January 10 committee orientation, legislative counsel Kirby Keaton and Joint Fiscal Office associate fiscal officer Chris Roop briefed the Ways & Means Committee on fundamental tax mechanics and a set of principles the committee should use to evaluate tax proposals.

Keaton opened with a plain formula for thinking about taxes: “tax base times tax rate equals tax liability,” and walked members through how the law defines a tax base, how exemptions and deductions shrink that base, and how credits reduce tax liability. He warned that partial or narrowly tailored exemptions can add compliance burdens: complex exemptions have in the past produced costly audits and taxpayer confusion, he said.

Roop, who oversees the JFO revenue team, presented six widely cited principles to guide lawmakers: sustainability and reliability; fairness; simplicity; economic competitiveness; tax neutrality; and accountability and transparency. “You know, lawmakers should strive to maintain a reliable, sustainable, and diverse revenue stream,” Roop told members, noting differences in volatility among tax types and the need to balance revenue stability with equity and administrative simplicity.

Both presenters illustrated trade-offs that recur in tax policymaking. Keaton described transaction costs — the paperwork, software and professional services taxpayers need to comply — and said a broader tax base can allow lower rates. Roop showed Vermont’s revenue mix (from the consensus revenue forecast): roughly 32% property, 31% income, 28% consumption and 9% fees/other, and said that mixture helps moderate volatility.

On equity, Roop summarized analyses that find Vermont’s overall state-and-local tax system is relatively progressive compared with other states, in part because of refundable credits and property tax relief. He highlighted that the top marginal rate is only one indicator and that effective rates matter more for most filers.

Presenters gave concrete examples committee members asked about during the session: the programmatic difference between a tax and a fee (fees are tied to a specific service; fines aim to deter behavior), the mechanics and timing of newly authorized payroll collections for child care, and interstate effects when neighboring states have different sales-tax policies. Roop summarized how Vermont applies the federal adjusted gross income (AGI) as the starting point for personal income tax calculations and noted Social Security exemptions enacted with phase-out thresholds (single filers begin phase-out at $50,000, married filers at $65,000).

Roop also reviewed sales-and-excise tax specifics used in examples: the state sales tax rate (6%), meals and rooms tax (9%) and an alcohol tax example (10%), and he discussed how exemptions (groceries, clothing) affect regressivity. He described prior proposals to reclassify certain packaged treats (a proposed definition of “candy” as items without flour) as taxable and said such definitional choices can create administrative complexity.

Committee members raised process questions about which issues belong to Ways & Means versus other committees, and a member noted fines are not a primary focus of Ways & Means because fines are designed as deterrents rather than a revenue source. Roop and Keaton encouraged members to consult JFO and legislative counsel as bills are drafted; Roop offered staff support for follow-up analyses.

The meeting closed with housekeeping: the committee scheduled a joint hearing with Senate Finance at 1:00 p.m. in the pavilion and reminded members of routine logistics.

The session was informational; no motions or votes were taken.