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Follow VPR's statehouse coverage, featuring Pete Hirschfeld and Bob Kinzel in our Statehouse Bureau in Montpelier.

State's Nonprofit Community Concerned About Proposed Tax Plan

Vermont's nonprofit community is strongly urging the Senate to oppose a tax plan passed by the House that caps income tax deductions. And the nonprofit organizations have an ally in Gov. Peter Shumlin.

The House tax plan is designed to raise roughly $32 million to help close the state's $112 million budget gap. It's a proposal that affects only those Vermonters who itemize their income tax deductions, roughly 26 percent of all taxpayers.

The plan does include one key provision proposed by the governor: It eliminates the deduction for state taxes paid in the previous year.

The controversial part of the bill caps all other deductions at two-and-a-half times the standard deduction. This would be roughly $15,000 for an individual and $31,000 for a couple.

The most common deductions are for charitable contributions, mortgage interest, property taxes paid and unusually high medical expenses.

Stuart Comstock-Gay is the head of the Vermont Community Foundation, a group that's made up of several hundred smaller foundations and that distributes roughly $12 million in grants every year. Comstock-Gay says he’s concerned about the impact that the cap will have.

"They're not going to stop giving, but it makes a difference at the margins in how much they give,” he says. “And that's our concern. Particularly at a time with the state having such a budget squeeze on everything, the civic sector is going to have to pick up more of the load than it has before.”

"They're not going to stop giving, but it makes a difference at the margins in how much they give ... Particularly at a time with the state having such a budget squeeze on everything, the civic sector is going to have to pick up more of the load than it has before." - Stuart Comstock-Gay, Vermont Community Foundation

Gov. Peter Shumlin shares these concerns.

"We'd be pretty lost in this state without a robust charitable donors supporting all the things that make this state great,” Shumlin says.

Calais Rep. Janet Ancel, the chairwoman of the House Ways and Means committee, doesn't think most Vermont taxpayers will be adversely affected by the cap.

"All those taxpayers still get the full federal deduction, which is worth a whole lot more than the state deduction. And because we've targeted at two-and-a-half times the standard deduction, there's really quite a lot of room in that cap for the deductions that matter to people,” Ancel says.

The legislation now goes to the Senate Finance committee for its review. There are early indications that the panel might make some significant changes to the House bill.

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