January 13, 2015


State & Local Taxes in 2015


Vermont Tax Code Features

Progressive Features

• Graduated personal income tax structure

• Provides a 32 percent refundable Earned Income Tax Credit (EITC)

• Provides a refundable property tax “circuit breaker” credit to low-income taxpayers via the income tax

• Many resident homeowners pay school taxes based on income rather than property value

• Sales tax base excludes groceries

• Requires the use of combined reporting for the corporate income tax

Regressive Features

• Provides a partial income tax deduction for state income taxes paid

• Provides a capital gains tax break

• Comparatively high cigarette tax rate

Tax Changes Enacted in 2013 & 2014

• Raised gasoline and diesel tax rates

• 13 cent per pack cigarette tax increase

• Set the base homestead property tax rate for FY2015 at $.98 per $100 of property value, the base homestead income rate at 1.8 percent of household income, and the base amount per pupil at $9,285. Homestead tax rates are determined locally by the amount of education spending per pupil. Homestead tax rates are proportionally higher in districts that spend more per pupil than the base amount.

ITEP Tax Inequality Index

According to ITEP’s Tax Inequality Index, Vermont has the 46th most unfair state and local tax system in the country. States with regressive tax struc­tures have negative tax inequality indexes, meaning that incomes are less equal in those states after state and local taxes than before (See Appendix B for state-by-state rankings and more details).

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