Gov. Phil Scott had been planning to include a proposal in his 2020 budget to exempt 18- to 26-year-old residents from the state’s income tax.
But on Friday, after learning from the Department of Tax that the proposal would cost the state $14 million in revenue, his administration abandoned the idea.
“It turned out to be more expensive than we originally expected, so we’re not going to be pursuing that,” Rebecca Kelley, Scott’s spokesperson, said.
According to Kelley, the administration had originally projected the proposal would only cost a few million dollars.
The governor, who has made bolstering the state’s shrinking labor force a priority of his administration, said earlier this week that he believed exempting 18- to 26-year-olds from the income tax could be a way to attract young families and workers to Vermont.
“I think everything should be on the table, and we should do everything we can to attract more people, more families and individuals to either come to the state or be here, stay here in the state,” Scott said Thursday.
“We just have to make sure we make it as affordable as possible for them to get a start.”
NBC 5 first reported this week that the governor was planning to pitch the income tax exemption.
Kelley said that the governor’s budget is expected to include other “targeted tax relief” measures, though she declined to detail them Friday.
Scott will deliver his budget address on Tuesday.
Rep. Bill Canfield, R-Fair Haven, who proposed a bill that includes the tax exemption, said the legislation also includes a “larger tax relief package” supported by the administration.
Before Scott dropped the plan Friday, lawmakers said they were open to the idea, depending on how much revenue the state would lose from the exemption.
“I would really have to see the numbers,” Sen. Michael Sirotkin, D-Chittenden, who chairs the Senate Economic Development Committee, said Friday. “But as you know, I like attracting people to the state.”
Rep. Heidi Scheuermann, R-Stowe, said she thought the proposal could be a good way to draw in young workers who might settle down in Vermont and eventually replace the lost tax revenue over time.
“In the end, if you bring them in and they stay here past 26, then you have more revenue coming into the state,” she said.
The governor’s budget is expected to be tight this year.
While economists said this week that Vermont can expect to see about $20 million more in tax dollars this year than previously expected, the state’s expenses are projected to grow.
The Scott administration has projected a $70 million budget gap as spending pressures mount from rising state employee salaries, growing demands on social services, and Vermont’s massive teacher pension debt.
