[G]ov. Phil Scott’s plan to stop taxing the Social Security benefits of low-income Vermonters is gaining in popularity.
The governor’s proposal, which he introduced in his January budget address, would exempt about 35,000 Vermonters from paying state income tax on their Social Security benefits.
Greg Marchildon, the Vermont director of AARP, told a press conference Tuesday afternoon that the organization embraced the proposal.
More than 140,000 Vermonters rely on Social Security benefits, Marchildon said, and for a quarter of those Vermonters, the benefits provide more than 90 percent of their household income.
“Taxing an often meager retirement benefit takes away money that could … pay for medications, food, heating fuel, and help cover the ever-increasing costs of property taxes,” Marchildon said.
Vermont is one of only four states that fully taxes Social Security benefits of its retirees. Marchildon said it has been 34 years since the state has adjusted the threshold at which it taxes the federal benefits.
Members of the House Ways and Means Committee said they, too, hoped to provide tax relief for Vermont retirees, in a form similar to, if not exactly the same as, the governor’s proposal.
Under the Scott administration’s proposal, a retiree earning an adjusted gross income of $45,000 or less would no longer be required to pay state income tax on Social Security benefits, Kaj Samsom, the commissioner of the Department of Taxes, said. The tax break would phase out with an increase in income from $45,000 to $55,000.
The break would apply to couples earning an adjusted gross incomes of $65,000 or less.
The Scott administration has said the break would be phased in over the next three years, and at the three-year mark the cost to the state would be $6.1 million annually. The benefit to the state, Scott has said, is that it would encourage retirement in Vermont.
Rep. Kurt Wright, R-Burlington, a member of the House Ways and Means Committee, expressed hope for the passage of a bill this session.
“I would be very disappointed if we do not come out of this with some kind of legislation … whether it’s the governor’s proposal or something like that,” Wright said.
Rep. James Condon, D-Colchester, who also sits on the committee, said the tax cut could become part of the miscellaneous tax bill the House typically passes each year.
Last year, Wright and Condon were joint sponsors of a bill to provide a tax exemption to everyone receiving Social Security benefits, at an estimated cost of $30 million.
Condon said support for state income tax relief for beneficiaries is strong.
“To get the ball rolling for a three-year incremental increase in the exemption amount makes a lot of sense to us,” he said. “Any expense is a concern, but this is one of fairness to people. This is their money.”
Said Wright, “We just need to … prioritize spending, live within our means and let the seniors have that money back.”
