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

Federal Tax Overhaul Could Prompt Re-Examination Of Vermont's Tax Code

House Ways and Means chairwoman Janet Ancel is hopeful that this is the year for lawmakers to consider a new plan to fund education
Angela Evancie
/
VPR file
Calais Rep. Janet Ancel, pictured here in 2015, is chairwoman of the House Committee on Ways and Means. Ancel says lawmakers will likely devote much of the 2018 legislative session to understanding what the federal tax overhaul means for Vermont.

The chairwoman of the House Committee on Ways and Means says changes in the federal tax code could force some tough decisions for Vermont lawmakers next year.

This week, members of the U.S. House and U.S. Senate will try to iron out details of their sweeping federal tax overhaul. Calais Rep. Janet Ancel says she doesn’t know yet what the changes might mean for Vermont. But she says if the bill makes it through Congress, then the House Committee on Ways and Means will spend much of next year trying to figure that out.

“We’re going to be devoting certainly the early part of the session and probably most of our time to the federal tax changes — understanding what they’re doing to the Vermont economy, understanding what they’re doing to Vermont revenues, and understanding what they’re doing to Vermont individual and business taxpayers,” Ancel says.

Vermont’s tax code is in many ways decoupled from the federal system, but linkages between the two systems mean changes enacted by Congress could have wide-ranging impacts on revenue collection in Vermont.

“We, for example, use the federal standard deduction figure … so when they increase the standard deduction, that has an impact,” Ancel says.

"I certainly would have as one of my guiding principles that we don’t want our tax system to be any less progressive than it currently is." — Calais Rep. Janet Ancel

The federal changes wouldn't be limited to the individual income tax. Congress is contemplating major changes to the corporate and estate taxes as well. And once Ancel and her committee members figure out how the federal bill will affect Vermont, she says they’ll have to decide what, if anything, to do about it.

“One of my concerns is that there are a lot of unintended consequences in the federal tax bill that may also flow through to the state. And, you know, all I can say is that we’ll do the best we can with them,” Ancel says.

One of Ancel’s chief concerns is how changes in the federal tax code will affect low- and middle-income tax filers. Vermont has one of the most progressive income tax structures in the country, meaning the more a person earns, the higher the percentage of their earnings they pay in state taxes.

If changes to federal tax code alter that equation, then Ancel says lawmakers in Vermont might want to find ways to neutralize the impact.

“I certainly would have as one of my guiding principles that we don’t want our tax system to be any less progressive than it currently is,” Ancel says.

Ancel says her committee will also have to find time to deal with the issue of property taxes, which are used to pay for public education in Vermont. With the statewide homestead tax rate set to rise by 7 percent next year, Ancel says many lawmakers, and their constituents, are pressing for reforms.

“I think it is time for us to look seriously at whether we can make the funding system simpler, and at least as fair as the current system is,” Ancel says.

Ancel says she’s already spoken with Vermont House leadership about several property tax reform proposals. She says leadership hasn’t landed on a specific plan yet, but that some lawmakers are interested in pursuing a school-funding structure based more on people’s income than their property values.

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