by Susanne Young, Secretary of Administration Recent tax changes championed by Governor Phil Scott are helping to make Vermont more affordable for families and small businesses, grow the economy and better protect the vulnerable. This Administration has worked hard to ensure the budget did not raise any general fund taxes or fees and held the average statewide property tax rate level for residential property owners. That was unprecedented. This year’s budget held the line and did not raise taxes or fees while keeping the statewide residential property tax rate level for a second year in a row.
In the five years leading up to 2017, the average Residential Property Tax rate grew by an average of 4% per year. In the past two years, the rate dropped by 2.7 cents in year one and was kept level this year. If you’re a residential property tax payer and your rates went up, it is because of local factors – such as local spending growth – not actions in Montpelier.
While it’s unfortunate legislative leaders demanded a modest increase in non-residential statewide property tax rates this past session, the Administration’s other tax and affordability accomplishments represent a positive step in changing the state’s trajectory. By acting now, taxpayers can maximize the benefits of the income tax changes, because they take effect this year. All in all, the Governor’s proposed changes can help you keep more of what you earn. And, as we continue to work to reduce the percent of household income Vermonters must pay in taxes and fees, this will help families be more secure and move up the economic ladder.
For example, nearly 40,000 income-eligible Vermonters receiving Social Security payments will benefit from an income tax exemption. Again, the new law we proposed and passed by the Legislature takes effect this year for tax returns filed next spring. The new exemption will save Social Security beneficiaries approximately $5 million this year (total savings will increase in future years) and applies to all types of Social Security income that are taxable at the federal level, including retirement, disability and survivor benefits. For those taxpayers who file quarterly estimated payments, the savings could be more immediate by reducing estimates paid this year.
Most working families have already benefited from the personal income tax changes in our Working Family Taxpayer Protection Act. But for these state tax code changes, the impacts of the federal Tax Cuts and Jobs Act would have resulted in $30 million more taxes collected at the State level, primarily from working families with children. Many taxpayers benefited from lower federal tax rates through payroll deductions in their paycheck during the first half of 2018 and these changes allowed them to receive the full benefit of the federal changes.
And, for those who have made, or plan to make, charitable contributions in calendar year 2018, keep track of that giving, no matter how small or to what tax-exempt charitable organization. All Vermont taxpayers are eligible for this tax credit for 2018 when they file their income tax returns next year, without itemizing deductions. Now, every taxpayer can claim a credit of 5 percent of the first $20,000 in eligible charitable giving. This is great news for taxpayers and the local charities they support.
And let’s not forget the savings to Vermonters because Governor Scott refused to increase fees. While past practice has been to raise fees every few years, our budgets gave Vermonters a break from these increasing costs as well. In fact, Vermonters have saved over $5 million due to a more thoughtful approach to fees. And, we aim through additional modernization of systems and processes in state government to limit fee increases in the future as well.
Overall, this is a different approach to tax policy and budgeting than in previous Administrations. We are also working to improve operations and efficiency so that we can provide more value for taxpayers while slowing state spending growth and maintaining critical services. With these reforms, and more, we’re working together to make Vermont more affordable, while investing in a strong future.