Vermont Legislature SmartTranscripts:

[Emilie Kornheiser (Chair)]: Good morning. Good morning. It is Friday, February 13, and we are gonna have a good day anyway. 9AM. This is the Ways and Means Committee. We have three bill introductions this morning, and then we are gonna be very prompt to the house floor because we also have a very special devotional. And then after the floor, if folks could come back come back promptly, we are doing a walk through of miscellaneous tax bill as it stands today. And then after lunch, we are back here at 01:00 or five seventy seven. And there's another thing.

[James Masland (Member)]: Page's last day.

[Emilie Kornheiser (Chair)]: End of the page's last day. Double reason to be on time. Okay, and with that, Representative Burkhardt, would you like to join us?

[James Masland (Member)]: We do. Thank you.

[Emilie Kornheiser (Chair)]: Lot of paper today.

[Kate Logan (Representative)]: Morning. Morning. Morning.

[Greg Burkhardt (Representative)]: Representative Greg Burkhardt, for the record, here to talk about the uniform capacity tax bill that I have in 08/07/2012. It's a pretty straightforward change that the bill makes. Uniform capacity tax is the tax on solar arrays in our state. Instead of paying a property valuation tax, they pay a uniform capacity tax, which is based on the nameplate rating on, I don't know, somewhere on the system where, you know, where it ties into the grid. And so, like, if it's a one megawatt system, they're going to be paying by the kilowatt, which is $4 a kilowatt currently. So one megawatt is like $440,000 in taxes, I think it is, annual annually for a one megawatt system. So one megawatt, I think, takes up well, I know a 20 megawatt system takes up about a 100 acres of land.

[Emilie Kornheiser (Chair)]: Thank you for that scale. That was helpful.

[Greg Burkhardt (Representative)]: Yes. So a twenty twenty megawatt system would be paying $80,000 a year of tax currently. But if you actually look at the value of that property with the solar array on it, it comes out to they they should be paying taxes of around a half 1,000,000 a year if it was done through a lister in the town and appraised like a normal power plant would be valued at. So it's it's there is a significant tax rate for solar arrays right now, which was done intentionally. That's why they kinda carved out the uniform capacity tax. But my bill here would raise the uniform capacity tax to $16 a kilowatt, which would bring a system like that up to $320,000 a year, which would still put it below what it would normally be tax debt based off of its property value, but it kind of puts it more in line with what other power systems would be paying. And the reason why I think there's room to do that is if you look at the companies that are putting in those that scale of the system, they're not it's not like a company that's like a a startup company of Vermont that's struggling to make it, you know, free point commodities is has one in Shaftesbury that's been permitted. I think one in Fairhaven that's been permitted, and then they have another one in Patton slated to be put in, and they're an international corporation that has plenty of money. And I feel like if our state's going to be looking at helping our the tax situation out, then I don't know why we would cut a company like that a deal and then have, you know, our constituents struggling to pay their property taxes. So I think it just brings, I don't know if you call it parity or whatever to the situation, a little bit more quality of how we tax these companies. And the other thing it does, which I think would be really helpful, is half of the tax would go into the new farm special Farm Security Special Fund, which we created last year with S60 and has no money. It would be huge to be able to have like a source of money annually going into that for farmers. It would help bring balance to the situation because these arrays are being put on farmland, and it's farms that are usually having to decide If it's a profitable farm, you probably wouldn't have a solar array be put up on it. They pay about, at best I've heard, about $1,200 an acre to lease the land, which is pretty good, but winter squash brings about $5,000 an acre if you have a market for it. So, it's really a battle between the probability of farming and here's someone coming along offering me an easy way to still use my land to be a source of income. So, yeah, I'm a farmer. I'm on the AI Committee. So, of this is about using this to help preserve our farmland and our working farms. So, if we're pulling some tax into the farm special security fund, then there's a chance that, especially with all the flooding and droughts we've had, that it's going to help farmers keep their livelihood in farming just to create more balance to the situation.

[Emilie Kornheiser (Chair)]: We're doing a lot to change our appraisal process, and we've moved utility valuation to be much more consistent and all just within the property tax over the last couple of years. And it's interesting that we have left this out. And then what you said about the long standing desire for a discount in order to incentivize the behavior, we have the mechanism of current use to do that in other cases. And so it's just I don't know. It's interesting that this has been sitting as a separate tax when we've created other systems that are sort of more consistent to meet those same policy goals. So I appreciate you bringing this forward.

[Greg Burkhardt (Representative)]: Yeah. Very good. Does it apply to existing already up and running? Aren't as well? Yeah. To solar solar arrays. Yeah. Yeah. To to solar the owners of the solar arrays. Right. Yeah. Yeah. Not just those going forward. It does it wouldn't trigger until you're at a 50 kilowatt capacity, which it's about the size of a tennis court. Anything at a tennis court size array down is already exempt from uniform capacity tax. Homeowners, we've talked solar, small scale solar is exempt currently, they would remain exempt. Really, when you get to utility scale, what this bill is talking about.

[Larry Satcowitz (Representative)]: Yes. Representative. Just to elaborate on representative Burkhardt's talking about, you

[Mark Higley (Member)]: maybe read a story about Lowell's proposed solar project on 44 acres of prime ag land to Hayfield. 33 acres of it will be taken up by 15,000 solar panels. The group that's proposing it has implemented, I believe, 25 solar projects and they, my understanding is they've retained only four of them. So again, they, and they're big corporations that they bought out. Yeah, and as far as the list goes, we can only assess the land as the land stands today. So it's quite a conundrum for especially small towns. I mean, the developer was to go 100 miles south towards Woodstock, the price they would have paid for that 44 acres would been at least four times as much. So they're calculated and there's some other initiatives that are out there as well that I think will help this, but this would also help.

[Emilie Kornheiser (Chair)]: Thank you. Thank you so

[Kate Logan (Representative)]: much. Go ahead, Rebecca.

[Rebecca Holcombe (Member)]: I was just gonna say, I also appreciate you bringing forward a funding mechanism for the fund, because that's one of my bad people's money. I've got so many there, and so I really appreciate that, because it's a very important program.

[Greg Burkhardt (Representative)]: I did debate about whether or not to introduce just a repeal to UCT and then it would go through just a normal appraisal process. And a part of it for me is having the system already here creates a mechanism to fund that. Yeah.

[Kate Logan (Representative)]: Appreciate it. Thank you so much

[Rebecca Holcombe (Member)]: for coming in.

[Greg Burkhardt (Representative)]: Can I say one last thing?

[Larry Satcowitz (Representative)]: That was a

[Greg Burkhardt (Representative)]: From what I've my researched, it looks like about $7,300,000 additional taxes coming in through this. So yeah, divide that up. It might put in $5,000,000 a year to the Farm Security Fund, but it's like, I've heard $20,000,000 is what we want to be at, so it's getting there.

[Kate Logan (Representative)]: Thank you. Appreciate it.

[Emilie Kornheiser (Chair)]: Representative Sakowitz. Hello. Thanks for joining us.

[Larry Satcowitz (Representative)]: Good morning, everybody. It's so good to be here. Thank you for having me. Absolutely. So I'm representative Larry Sakowitz from Randolph, here to talk about h seven thirty two, I believe, is its number, and it's a short form bill. And, yeah, as as we all know, we have a problem where property taxes are too high for ordinary Vermonters. At the same time, we have a situation where the wealthiest Vermonters, people at the highest income brackets, have been seeing their overall tax burden going down in recent years. And so it seems like we have an opportunity to to fix that and help ordinary folks at the same time. When we talk about tax legislation in general, it's often very complicated very quickly. My bill is very, very simple, and it's simple on purpose because I think having a simple bill makes it easy to communicate to the public. And so, basically, my bill would increase the marginal rate on incomes above $400,000 for couples by 1%, and then an additional 1% for couples earning over $800,000, and half of those income rates for individuals. And that is the bill. Happy to take questions. Perry, in

[Mark Higley (Member)]: your proposal on the short form, it looks like it takes any of those additional revenues and then applies it to

[Larry Satcowitz (Representative)]: the tax credit. I started getting there at the beginning, I didn't quite circle around. Thank you for that. Yeah. So the idea is that we would take those additional revenues that are generated by the increase in these marginal rates and funnel it specifically to homestead properties who qualify for income sensitivity. So very directly targeting this additional money to lowering the income tax, the property tax for people who can most use that additional benefit.

[Mark Higley (Member)]: You're thinking that would be in addition to the existing property tax credit or replace that? This would be in addition

[Larry Satcowitz (Representative)]: to whatever we have, the idea being that I think all of us have heard loud and clear that people feel like property taxes have grown much too quickly would help us move back in a better spot for those folks. Yeah, thank you for bringing me back around. Is there an estimate of revenue that this would bring in? I didn't get an estimate of non revenue.

[Emilie Kornheiser (Chair)]: Do you the reason to have your thresholds different for single and married filing Just

[Larry Satcowitz (Representative)]: on the presumption that married jointly folks have higher incomes than than individuals do, and so it seems like the threshold should be different. The the bill is really intended to be the start of a of a conversation around an idea which is about increasing the rates on our highest income earners and funneling that money to the people who most need to be relieved of the burden of their property taxes. And the exact numbers of how we do that is, I think, is, you know, is something which would require a lot

[James Masland (Member)]: more

[Larry Satcowitz (Representative)]: testimony and and and and research. It's a short form bill, and it's basically meant to just give that that general idea.

[Emilie Kornheiser (Chair)]: I'm sorry your testimony is so interrupted today, but I'm I'm trying very hard to focus, and I appreciate it.

[Larry Satcowitz (Representative)]: Thank you for describing it. Any

[Emilie Kornheiser (Chair)]: further questions? Yes. Representative Masland? Thank you.

[James Masland (Member)]: Very probably, I guess, I commend you for trying to distinguish between higher income people and lower, you know, particularly couples who are not dumb. I guess my experience is, married couples, like anything, they could be clever on how they deal with income. So I'm not sure that your logic carries through on we pay higher, we pay, you know, even higher than that. So just to comment for you

[Larry Satcowitz (Representative)]: as you've

[James Masland (Member)]: been working through on this.

[Larry Satcowitz (Representative)]: Yeah. Yeah. No. I things get I know things in this room get complicated very quickly. I totally I appreciate

[Emilie Kornheiser (Chair)]: you so short of time. You're like, I'm not gonna wade into the complication of you all. I'm just gonna give you an idea. So thank you.

[Larry Satcowitz (Representative)]: Right. It's really this idea that the wealthiest folks in our state have been doing very well in recent years. They've seen their burdens for overall taxes go down. Ordinary folks, the the about two thirds of us who who own homestead properties have seen our rates going up very quickly. It seems like a natural fit to balance things out a little bit better, and that's what my bill tries to do.

[Kate Logan (Representative)]: Thank you so much.

[Emilie Kornheiser (Chair)]: I really appreciate the intent and the thought.

[Larry Satcowitz (Representative)]: Thank you all for the opportunity to present to the committee.

[Mark Higley (Member)]: I really appreciate it.

[Larry Satcowitz (Representative)]: Have a

[Emilie Kornheiser (Chair)]: great day. Thanks. You later. Representative Logan, do you want to join us? Thank you.

[Kate Logan (Representative)]: Good morning. Thank you, chair. Thank you, vice chair. Thank you, members of the committee for hearing me chat about h seven ninety four of it this morning. I'll start off with a little background on income inequality in Vermont. I think you've heard testimony along these lines already this year, a quick overview of the bill, and then just some explanation about the rationale behind the bill. So, as Representative Szazakowitz mentioned, we know that the top income earners in Vermont relative to the bottom income earners in Vermont are doing really, really well and have gotten an enormous tax break in the big beautiful Bill Act. So the average taxpayer earning $321,800 to $758,600 the top 4%, was $17,290 a year from the Big Beautiful Bill Act. And for income over $750,000 around $57,000 a year annual tax burden reduction. There's been a slight reduction for the lower 95%. But if, for example, any one of those people were to be getting their health care off the marketplace, for example, someone who's earning about $60,000 a year, their income tax decrease would have been about $600 whereas their premium increase on an annual basis would have been about $5,000 So we're ramping up income inequality in Vermont really rapidly just because of these revenue changes and health insurance changes that were made at the federal level last year. So it's an opportunity, I think, that the federal government has given us to take some further responsibility of the state, generate additional revenue, and then decide how we'd like to spend that, what we think are the cost drivers of unaffordability in Vermont and how we can best use additional revenue to address the cost of living in Vermont. So that's what this bill tries to do. Overview of the bill. Section one is the title. The title is the Preserving Revenue for State Programs and Economic Resiliency Act, or the PROSPER Act. Yeah. Section two is on the personal income tax surcharge. Section three is a wealth proceeds tax. Sections four through seven and ten get into the details on property tax in this bill. Section eight and nine discusses the school's construction aid special fund. And then section 11 is the effective dates. So for this bill, there are three taxes discussed. One is the income tax, that would be retroactive to 01/01/2026, noting, the ACA subsidies, the advanced premium tax credits ending at the 2025. So that's sort of a suggestion that we might want to do something about that for Vermonters this year. The wealth tax is actually fairly simple to bring on in administration in the state. I'll discuss that a little bit later. So that would be implemented next 01/01/2027. And then the property tax is described in here as proposed to begin 01/01/2028. Okay. So I'll go a little bit into the details. But first, I want to start by saying what the revenue estimates would be for the bill, not for the property tax piece, because this has not been adequately modeled yet. But for the income tax surcharge that's proposed in the bill plus the proceeds tax, the revenue estimate from Public Assets Institute is that the income tax surcharges would raise $344,000,000 a year in annual revenue, annual state revenue, and the 4% wealth proceeds tax would raise $75,000,000 in annual state revenue. So together, that's over 400,000,000 additional annual state revenue, purely from taxes that were already being paid to the federal government and would just now be paid to the state government. The surcharge option in my legislation is based on a plan to recapture revenue that went to the federal government prior to the implementation of President Trump's Big Beautiful Bill Act, plus our original plan from the prior session of a 3% surcharge on income over 500,000. So the recapture plan is a 2% surcharge on income over 250,000 and an additional 3% surcharge on income over 500,000. Those would recapture 100% of the federal tax cut for the top 1% of income earners and approximately 10% of the federal tax cut for the next 4%. So a far more modest increase for those earning from the ninety fifth to ninety ninth percentile. The argument for adding in the original 3% additional surcharge that we had proposed in the last session is that our tax system was already unfair. And highest income earners in Vermont weren't paying their fair share in taxes. And we know, in fact, that many middle income families were paying more taxes on an annual basis than the highest income earning families as a percentage of their income. So overall, that would be a 2% surcharge on income from 258,000 to $500,000 and then an additional 6% on all income over $500,000 only impacting the top 5% or the top 5% of income earners in Vermont. The wealth proceeds tax is, I know, something that we've been interested in thinking about how we might implement a tax on wealth in Vermont. Would use what I proposed would use a federal tax form called the net investment income tax that only applies to the proceeds of wealth for high income households. So it's just modeling on a federal instrument that already exists. This makes implementation simple. So the mechanism we've been using, the NIIIT federal tax form to tax the proceeds of wealth, was implemented in Minnesota already. The wealth proceeds tax is only putting a surcharge on the proceeds of wealth, not taxing wealth itself. So increasing taxes on things like capital gains, interest and dividends. The majority of the income that wealth proceeds tax receives preferential treatment at the federal level, meaning it's taxed at a lower rate than earned income. So assessing an additional tax on this form of wealth of screws it up in terms of tax fairness. And then finally, the bill establishes classifications for property types, new property taxes, would establish a nonstead residential tax rate as different from seasonal homes, commercial property, and sets the non homestead residential rate at a factor of two to the residential tax rate and a factor of one for the other property classifications. That revenue, again, we don't have an estimate on the revenue that would be generated from that tax. But in the bill, the tax would be allocated to the school construction aid special fund. The thought there being that we created the school construction aid special fund in Act 73, but we don't have a plan for capitalizing it. I think that there are other uses that the legislature wants to make out of a tax on second homes that would lower, for example, the residential property tax rate and provide that tax relief that we've been wanting to achieve. So my suggestion in that case would be to capitalize the school construction aid special fund with a tax on seasonal homes, a property tax surcharge on seasonal homes with a value of $1,000,000 or more. Yeah, I think that's it.

[James Masland (Member)]: Representative,

[Mark Higley (Member)]: are a

[Larry Satcowitz (Representative)]: lot of moving parts.

[Kate Logan (Representative)]: Yes,

[James Masland (Member)]: There things in your bill, and they're all worthy of discussion. And we're this you know, the first week of the discussion, this this session, someone might suggest you divide your bill into several different bills, and we could take them up one at a time. Not my business to say that, except to say there are one of your major proponents will components will take some time to sort through. And we and the other committees will do the best we can with your multifaceted initiative. So I'm just this is a comment for now. Thank you.

[Kate Logan (Representative)]: I appreciate that. Yeah. I do think that we we're working with information that is pretty well known Understood. For this bill. And I'd say the reason for putting them all in one bill, one section of the bill says that the revenue from the income tax and the wealth proceeds tax would be allocated towards the implementation of Act 48, the bill to implement single payer health care in Vermont. So the argument here for this bill is that the most significant costs that Vermonters are facing right now that are really making life unaffordable here are health care and our public education system. We want to be able to provide funding for school construction. We want to maintain a really high level of educational services. I think we all agree on that. We know that one of the largest cost drivers of our education system is health care. And with $400,000,000 in annual state revenue based on estimates from universal primary care advocates, we could implement universal primary care almost immediately in Vermont and have funds left over to look at how we might implement a full single payer health care system in the state over the next several years.

[Emilie Kornheiser (Chair)]: Thank you, Kate. We spent quite a bit of time on income surcharges here, and I really appreciate how you thought about the direction and how things lined up. It's really wise. And I think you'll probably be happy to see that we are moving tax classifications forward. And we're fairly close to finishing with that work for the year. And we have not spent any time on the net investment income tax. And so appreciate you flagging it for all of us. Thank you.

[Kate Logan (Representative)]: Yeah, thank you. So

[Emilie Kornheiser (Chair)]: folks, we're going to go to the floor, and we'll be back here five minutes after the floor to pick up whatever the next thing, as I

[Kate Logan (Representative)]: said, we're gonna pick up with the pollute of staff.