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Ways & Means reviews competing tax‑bracket and VIP tax drafts to pay for policy options
Summary
Committee staff presented two competing drafts (5.1 and 6.1) that reconfigure income tax brackets and a Vermont investment proceeds (VIP) tax; members debated rate shifts, timing, confidentiality language and potential revenue stability risks, and asked for Pat’s fiscal tables for quantification.
The Ways & Means Committee reviewed two draft tax packages on April 28 that would shift income‑tax liabilities and fund or offset health‑care proposals before the committee.
A staff presenter described draft 5.1 as increasing how much income falls in the second‑highest bracket while raising the top marginal rate in one version toward about 12.4%. The presenter said the VIP tax (Vermont investment proceeds tax) language in the draft is set near 3.45% to fund certain health‑care credits. In contrast, draft 6.1 was presented as an alternative that lowers the lowest marginal rate (from 3.35% to 2.95%) while still increasing top‑bracket rates for very high incomes; the presenter noted that thresholds in the drafts mean a household filing married‑jointly would hit the top bracket near $586,625 in taxable income.
Committee members pressed on the distributional effects and fiscal stability: one member warned that shifting tax burden toward the top could destabilize revenue if the state enters a recession because top‑end income can be more volatile. The staff presenter noted existing JFO and staff work and said Pat would present tables to show the net fiscal effect and distributional consequences.
The drafts also contain a proposed change to tax confidentiality in section 6 to allow some information sharing with the Department of Vermont Health Access for administering credits; staff said the effective date for the proposals would be 01/01/2028 in the current language. Members deferred final judgment until numeric tables and formal fiscal analyses are presented.
No votes were taken on the tax drafts during the session; the committee recessed to await Pat’s tables and further numeric briefing.
