This story was updated May 16, 2025, to include new veto language.
by Timothy McQuiston, Vermont Business Magazine At Governor Phil Scott's regular press conference on Wednesday, he again pushed for the tax proposals he first presented in January. He was hopeful they would get through the Senate and conference committee without significant changes. In particular, he proposed to exempt military retirement and survivor benefit income from Vermont income tax. Also on Wednesday he lamented that the TIF bill (S.127), which could assist in local housing development, would not be sufficient as is.
Scott has been pushing for the veterans tax change since he became governor. About 4,000 veterans in Vermont could benefit directly from the tax break and most states offer the exemption. While the pension issue is now being promoted largely as a workforce enhancement by making the state more affordable, as most veterans are still of working age when they are eligible for a pension, the tax deal had been hung up in previous years as one of making veterans a protected class of worker.
The Senate version, packaged in S.51, contains other tax and workforce language and thus likely require a conference committee to iron out changes made in the House, which included the veteran pension language. There is tri-partisan support for the pension issue in the House.
Scott is focused on four tax provisions overall, which he said would make the state more affordable: The 100% veteran pension exemption, which includes survivors; increasing the child tax credit age from 5 to 6 years old; increasing by $5,000 the Social Security limit on taxable income; and boosting the earned-income tax credit, which helps lower-income Vermonters.
The governor also said he is hopeful that the education transformation bill (H.454) would make it to his desk in a form he could sign. The bill makes numerous changes to Vermont’s statewide education system and education funding system. It would create a legislative school district boundary Task Force, require a review of the State Board of Education’s rules, implement the State Aid for School Construction Program and Advisory Board, and require the Agency of Education (AOE) to draft a three-year Special Education Strategic Plan. It would also implement a transition of tuition eligibility and amend statute to recalculate the amount of tuition that can be paid to a receiving school.
The bill also would repeal most of Vermont’s statewide education finance formula and establish a new funding formula and statewide property tax structure. This would include the creation of a foundation formula with supplemental district spending, four property classifications for statewide education property taxes, a repeal of the property tax credit, and the implementation of a homestead exemption. The bill would also establish Regional Assessment Districts.
Despite the grandiose nature of the bill, it would not take effect until July 1, 2029, meaning there would be much work to be done on the above items before it is implemented. Scott was initially frustrated by the timing because he wanted implementation by September 2026. He has since said that this bill at least begins the process of transformation.
"I still have great hope," Scott said.
In response to questions about his executive order issued Tuesday over "pausing" the electric vehicle requirements for car dealers, he said the EV charging infrastructure is not prepared to meet the needs of drivers and therefore not enough EVs are being sold. He added that the White House has not released how and when the funding already allocated for that infrastructure will be released.
"We need more charging, more fast charging," Scott said. EV owners would agree.
The governor was also asked to comment on the health insurance requests that the Green Mountain Care Board received from Blue Cross Vermont and MVP earlier in the week. The rates, which the GMCB usually reduces, would require those in the small business group to face increases of 13.7 % for Blue Cross and 7.5% for MVP.
The governor was asked why health care costs were not a priority of this session. Scott said he was prioritizing housing, property taxes and affordability this session and that the administration can't do everything at one time.
Scott said they're working with the GMCB on both the insurance side and hospital cost side, where many hospitals are suffering financially. He acknowledged that the cost of health care was unsustainable.
So far the governor has only vetoed the budget adjustment bills, which were never passed into law (H.141 and H.489). He has vetoed more bills than any governor in the history of the state, but until Thursday he had not vetoed another one until he did so on a constitutional issue over a bill he otherwise supports, H.219
, An act relating to establishing the Department of Corrections’ Family Support Program.
He noted that the legislative leadership, no longer with a supermajority, must negotiate with the administration.
"They know they have to listen to us. To me," he said.
Governor Phil Scott later on Wednesday issued the following statement on the TIF bill: “S.127 is a bill that expands Tax Increment Financing (TIF) to empower smaller, more rural towns to take advantage of this impactful economic development tool. Currently, due to complexity, only our bigger towns and cities have the capacity and resources to do so.
“S.127 passed the full Senate and then went through two House committees. Unfortunately, the House Committee on Ways and Means (tax committee) is proposing significant changes, making it harder and almost impossible for small towns with limited resources to take advantage of this tool, which will limit the housing and economic development they desperately need.
“Vermonters asked us to fix problems and make it easier for rural communities with limited resources to revitalize their economies. The House Ways and Means changes will undoubtedly have the opposite effect. I hope legislators, especially those from rural communities, will amend the bill when a vote takes place by the entire House of Representatives. The expansion of the TIF program, as originally proposed, will help lift up all corners of Vermont, from Readsboro to Richford.”
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