Ways & Means reviews new 13.3% top personal income tax bracket for top 1% of returns

Joint Fiscal Office staff told the Ways & Means Committee that the draft bill would add a new top marginal personal income tax rate of 13.3% for high-income filers. The proposed threshold—about $586,000 of AGI for married filing jointly—was described as the 2024 cutoff for the top 1% of Vermont returns.

Titterton said the cutoff represents roughly 3,300 tax returns (about 8,500 individuals) and that the top 1% account for approximately 17% of total Vermont AGI and about 30% of net personal income taxes paid. "So in a sense, this level is representing the top 1% income earners amount in the state of Vermont," he said. For fiscal planning, staff estimated the bracket changes would raise about $114,000,000 beginning in fiscal year 2028.

Committee members questioned the durability of relying on the top 1% because the threshold and cohorts shifted during the COVID period. Staff showed charts indicating the dollar threshold for top-1% status rose significantly during the pandemic and that Vermont has a relatively older high-income cohort compared with national averages. Members asked whether high-income filers are concentrated among retirees or business owners and whether migration in and out of the state could materially change revenue expectations; staff said they could prepare additional analysis and that outside witnesses would be invited to testify.

Procedural note: staff confirmed the effective date in the draft is for tax year 2027 (affecting FY2028) and said the committee will continue with language review and further testimony later in the week. No formal vote occurred in the morning session.