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Finance Committee discusses second‑homes tax, possible new top bracket to attract professionals

Finance Committee · February 19, 2026

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Summary

Committee members discussed adjustments in the miscellaneous tax bill—including higher non‑homestead rates for second homes—and options to add or raise the top income bracket to remain competitive and retain professionals. Staff was asked to produce JFO revenue analysis.

Members of the Finance Committee spent substantial time on proposed tax‑code changes on everything from a second‑homes levy to whether to add a higher top bracket to make the state more competitive for professionals.

Committee member S1 told the panel the misc. tax bill will include a second‑homes tax adjustment and potential rate changes for non‑homestead residential properties. "I think the biggest thing we're gonna do is we have passed the second homes tax, and that will be coming over to us... and that would be an adjustment of those rates," S1 said, noting the prior uniform rate and possible higher non‑homestead rates for second‑home owners.

The discussion also focused on income‑tax thresholds and competitiveness. S1 said Vermont currently compresses its upper brackets and cited the example that joint filers reach a significant bracket at about $300,000. "We've collapsed those top two tax brackets six years ago, in order to be more competitive with the rest of New England. I don't think that's worked," S1 said, and asked the committee to examine whether raising the top bracket or adding a new bracket could reduce disincentives for professionals to move to the state.

Members raised technical and administrative questions: one member asked if Joint Fiscal Office analysis exists on bracket changes and S1 replied staff (Patrick) would prepare revenue‑neutral options for committee review. The committee also discussed aligning state thresholds with federal rules for ease of administration and flagged a $200,000 threshold set in 2013 that members said no longer reflects current conditions.

The committee briefly reviewed past tax changes and deductions. S1 recounted that a 2016 tax change produced roughly $30,000,000 in reduced revenue and that earlier changes to charitable and medical deductions created concern and confusion among cultural organizations and taxpayers. "We reattached it, and we redid it," S1 said of later adjustments.

No formal motions or votes on tax changes were recorded in the transcript. The committee requested fiscal analysis and further staff work before advancing any bill; staff were asked to return data and revenue estimates to inform decisions ahead of crossover.