Scott’s initial proposal — which would have restored a 40 percent exclusion on capital gains earnings — was pitched as a fix to a 2009 change the Legislature made in the tax code.
Scott said he would replace the state’s tax exclusion on the first $2,500 of capital gains with a more generous tax break — a 40 percent exclusion on investment income.
The lieutenant governor said that by reducing the amount of taxation on capital gains income, Vermont would see more investment and become competitive with other states whose capital gains tax laws are generous.
In a glossy 50-page pamphlet he unveiled when pitching his economic agenda in September, Scott said that change would “encourage more investment and more savings, and thereby greater prosperity for Vermonters and long-term growth in our economy.”
However, the $2,500 exclusion the Scott campaign referenced was not accurate; the current tax code offers Vermonters an exclusion on the first $5,000 in capital gains income. Although a 2009 tweak did codify the exclusion for most Vermonters at $2,500, it was again amended in 2011. That change brought the exclusion back up to $5,000.
The Scott proposal has been updated to reflect the current tax code, and now proposes an incremental restoration of additional tax exclusions for capital gains.
“The inaccurate, and lower, cap in the earlier draft is the only reason for the disparate language,” Scott spokesman Ethan Latour told the Vermont Press Bureau, which broke the story. “The actual exclusion is twice as much as what we thought it was when we wrote the earlier draft, so confirming the right figure called for a different approach in a later draft of the plan.”
