Vermont House and Senate lawmakers approve deal on child tax credit

VTDigger
Published: 5/12/2022 10:45:36 PM
Modified: 5/12/2022 10:45:37 PM

MONTPELIER — House and Senate lawmakers have hammered out a final deal on HB 510, a $40 million tax cut package that would include a new refundable child tax credit for Vermont, and moved quickly on Thursday to send the bill to Gov. Phil Scott’s desk.

The final compromise between the two chambers would send Vermonters $1,000 per child 5 or under. Households making $125,000 or less would be eligible for the full credit; families claiming the credit would lose $20 per $1,000 over the income threshold.

The credit would impact an estimated 33,000 children in the state. The estimated cost to the state’s coffers for this new credit alone would be $32 million.

The Senate approved the bill on a voice vote Thursday morning. The House responded in the afternoon by pushing HB 510 across the legislative finish line on a vote of 141-4.

The tax credit is modeled on the federal child tax credit, which Congress temporarily expanded to $3,600 per child under 6 during the pandemic for families making $400,000 or less. The measure was widely credited for cutting child poverty by roughly 30% nationwide.

The expanded federal credit has since expired (although families who have not yet done so can still claim it for 2021). Democratic attempts to revive the boosted credit in the Build Back Better social spending package championed by President Joe Biden failed in the U.S. Senate after running into opposition from U.S. Sen. Joe Manchin, D-W.Va.

The Vermont House in February passed a $48 million version of the tax credit that would have sent $1,200 to every family making $200,000 or less for each child 6 and under. The Senate responded with a $1,000 credit with less than half that price tag — $22.5 million — that would have started phasing out for families making more than $55,000 a year. The upper chamber’s bill also would have ended the tax cut after three years; the final compromise bill does not.

It remains unclear whether Scott would sign the measure. The Republican governor also wanted a major tax relief package this session, but he had proposed to send tax cuts to a broader array of taxpayers.

With the final version of HB 510, lawmakers did adopt versions of some of Scott’s proposals. The bill, for example, would create a deduction for all interest paid on student loans for taxpayers whose income is $120,000 for single filers and $200,000 for married filers. It also very slightly expands the state’s earned income tax credit and significantly expands the child and dependent care credit. It also expands the income thresholds for Vermont’s Social Security exemption by $5,000.

House Ways and Means chair Rep. Janet Ancel, D-Calais, said she believed that, if enacted, the measure would likely create the most generous state-level child tax credit in the country. In total, HB 510 would reduce the tax liability of an estimated 70,000 people in the state, she added.

“In all my years here, this is the most significant tax relief package we’ve been able to offer Vermonters,” Ancel told colleagues on the floor.

Scott has insisted for years that Vermont should join other states in fully exempting military retirement pay, and has repeatedly emphasized to lawmakers that doing so was a top priority this session. HB 510 does not include such an exemption, although it does exclude $10,000 in military retirement pay — subject to income thresholds — which falls far short of the governor’s goal.

“The Governor hasn’t made a decision yet on the bill,” Jason Maulucci, Scott’s press secretary, said in an email. “He feels that the Legislature missed an opportunity to provide broader, more impactful tax relief for Vermonters, like he proposed in January. However, he is pleased that this year, the Legislature did come around to his view that tax relief is necessary.”

Nearly all Republicans ultimately supported HB 510 when it came time to vote. But a few nevertheless took to the floor to echo the governor.

Rep. Ken Goslant, R-Northfield, said he’d supported the measure because he wanted to help families with children — but said he was still disappointed with the partial military retirement pension exemption.

“We could have and should have done more for our veterans,” he said.

The bill would also increase the annual renewal fee paid by investment companies on mutual funds from $1,500 to $1,650, which is estimated to raise $3.6 million in additional revenues for Vermont.




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