PAI: A flexible, effective revenue adjustment tool
by Jack Hoffman, Public Assets Institute Twenty years ago, Vermont lost a valuable tool that let the state easily adjust state revenues to respond to fluctuating demands for public services. It’s time to find a replacement. In 2002, the state ended the simple, straightforward system for assessing personal income taxes that had been in place for more than 30 years. Vermont stopped using the “piggyback,” whereby the amount of income tax a person owed to Montpelier was calculated from the amount owed to Uncle Sam. Typically, the rate was about 25 percent of a person’s federal tax liability. But it varied, which was the beauty of that system. The strength of the piggyback system—being tied to federal tax policy—was also its weakness.