A couple of weeks ago the Joint Fiscal Office at the Vermont Legislature in Montpelier released a study on what would happen if federal employees living in Vermont were exempt from paying income tax on their retirement income. The tax exemptions would be on their benefits and retirement income below $40,000 for single filers and $60,000 for married filers. Income above that would be taxable.
This exemption has been discussed in the House Ways and Means Committee for years. Many Vermonters understand that lower taxes are better for the economy. The plan studied would exempt just this small group of taxpayers.
In the brief, the Joint Fiscal Office found there are 4,787 federal retirees already living in Vermont. If they were exempt from Vermont income tax, the state would collect $2.8million less in tax revenue. However, the retired employees would each get to keep that tax money. It would be between $450 and $1500 per year,per tax payer, depending on the rest of their tax picture. This additional money would probably go into the Vermont economy to pay for furniture, clothes, alcohol, snow machines etc. That money would not disappear, it would circulate within our economy. It would not be tax revenue, it would be expendable income.
There are complicated benefits and tax obligations resulting from amounts paid especially involving Social Security that need to be considered in calculating who would be better off and who would not.
But there is no doubt the whole state is better off if earnings can be controlled by the earners as long as possible, and if taxes are low.
For more information on this study, contact me at firstname.lastname@example.org