The Senate suspended parliamentary rules on Tuesday to hustle through its tax relief package.
The upper chamber’s version of H.510 — which passed unanimously — significantly reduces the child tax credit proposed by the House but beefs up Vermont’s tax exemption for child and dependent care and creates a new credit for interest paid on student loans.
The Joint Fiscal Office estimates the Senate’s package will cost a little over $36 million. It’s a significantly smaller tax package than what the House passed in February, which was expected to reduce state revenues by about $49 million.
The Senate’s version of H.510 is also time-limited. The Legislature’s economists are predicting rising inflation could signal a recession is on the horizon, and the proposal includes a sunset provision that would see the largest tax cuts expire after three years.
“Is it really the prudent thing to give all this money back? Because once you’ve given a tax credit, it’s very hard to take it back,” Senate Finance Committee Chair Ann Cummings, D-Washington, said on the Senate floor. “I think there was a certain ‘we won the lottery’ feeling in this building.”
The House-passed version of H.510 was simpler than the Senate’s bill. The bulk of the lower chamber’s proposal was dedicated to creating a child tax credit for Vermont, which would have sent $1,200 per child 6 or under to every family making $200,000 a year or less. The House bill also included a modest $5,000 expansion to Vermont’s income threshold for taxing Social Security benefits.
The expanded Social Security exemption is estimated to cost about $1.7 million; senators kept it as is. But they significantly trimmed back the child tax credit to $22.5 million by reducing the benefit to $1,000 and restricting eligibility for the full benefit to kids 5 or under and families making $55,000 or less a year.
At the cost of $5.35 million, the Senate’s bill also expands Vermont’s existing child care and dependent credit by upping it from 24% to 100% of the federal equivalent — and by making it fully refundable for all taxpayers, regardless of income.
Gov. Phil Scott had pitched his own $50 million tax cut package at the outset of the legislative session. It would have included tax cuts for military veterans, child care workers, nurses, people with student loans and low-income workers.
The Senate’s version appears to move in the governor’s direction. Senators included, for example, a new Vermont deduction for people paying interest on student loans (cost: $2.2 million). And while they passed on a tax credit for child care workers, they included a one-time $3.5 million appropriation for retention bonuses for them.
The Senate Finance Committee was uncomfortable with singling out professions for tax exemptions, Cummings said.
At his weekly press conference on Tuesday, Scott said he was “thrilled” to see the Legislature moving ahead on tax relief at all. He hadn’t yet reviewed the Senate’s version, he said.
He still disagrees with the general premise of a focused child tax credit, he said, as he’d prefer to spread tax cuts among a larger swath of Vermonters.
“I will say that I wouldn’t support (it) in its entirety, but I have to look at the whole package,” Scott said.
H.510 now heads back to the House, where lawmakers there will have to decide whether to accept the Senate’s changes or ask to reconcile differences in a committee of conference.
