Federal tax cut impacts state revenues

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(Host) Congress has passed a $330 billion tax cut, and state officials want to make sure Vermont doesn’t collect less in taxes as a result. Vermonters pay taxes based on a portion of their federal taxable income, so changes on the federal level have a ripple effect on the state. The Douglas administration has worked with key lawmakers on legislation that’s designed to protect the state budget from the federal changes.

VPR’s John Dillon has more.

(Dillon) Budget analysts in Montpelier aren’t sure yet of the full impact of the federal tax cut on state revenues. But early estimates are that the state could lose between $10 and 15 million in revenues.

Administration Secretary Michael Smith says it’s fairly easy to draft legislative language that will allow the state to adjust its tax code so that Vermont is held harmless from the federal change.

(Smith) “I don’t think it’s going to be that difficult to adjust. I think we’ll have the language that will allow us to adjust. We’re still calculating, and the Tax Department is still coming up with the language.”

(Dillon) Accountants and state tax officials are deciphering the federal tax law. Montpelier accountant Jeff Fothergill says it will be easier to make the changes now that the state no longer piggybacks its income tax to the federal system. He says that lowering the federal tax rate for dividends will have an impact on Vermont revenues.

(Fothergill) “I haven’t done a detailed study of the bill yet, but that one appears that it would actually flow through and get a benefit on the Vermont return that it does not enjoy now, simply by way of the change in the federal code. And the Vermont Legislature would have to say no we don’t want that to happen and here’s the change we’re going to make to prevent it from happening. That change would be fairly easy compared to what they would have had to have done before last year’s uncoupling.”

(Dillon) The legislative language that allows the state to compensate for the federal tax changes is now included in the education funding reform bill.

For Vermont Public Radio, I’m John Dillon.

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