Vermont Legislature SmartTranscripts:

[Senator Thomas Chittenden (Vice Chair)]: This is Senate Finance on January 20. Senator Cummings will be joining us shortly. The budget just was dropped and I believe she is with the pro temp just discussing some of the things that were just revealed.

[Patrick Titterton (Joint Fiscal Office)]: She

[Senator Thomas Chittenden (Vice Chair)]: did ask me to start the meeting off, so I'm really excited to turn the floor over to Senator Hardy to introduce us to S231.

[Senator Ruth Hardy (Member)]: Thank you, Mr. Vice Chair. S231 might look familiar to everyone around this table. It is a new version of a bill that I introduced last year that several of you were cosponsors of and that passed this committee and then the full senate unanimously and then got stripped out of the bill in the House and turned into a larger tax package. But this is the caregiver tax credit, and this is a new and hopefully improved version of the bill that we looked at last year. You might recall that last year it was a refundable tax credit for taxpayers who were what is called, you know, and it's defined in the bill as the unpaid caregiver. These are people who are caring for members of their own family who have either chronic illnesses or are disabled and are not able to care for themselves by themselves. So, often this is a spouse caring for another their their spouse who has dementia or it could be a parent caring for an adult with disabilities or a sister caring for her uncle. It could be a lot of different combinations of people caring for other family members who are not able to care for themselves but who are not paid to care for their family members. So, if somebody's being paid or they're getting SSDI or any kind of choices for care or programs like that that pay you to take care of family members, This isn't for that. This is for unpaid caregivers. And this would provide a the Vermont Family Caregiver Tax Credit. As I mentioned before, the previous version was a refundable tax credit that I think we ended up with a thousand dollar refundable tax credit means you get that tax credit even if you don't file taxes. You have to claim it, but even if you don't have a tax liability, you get the refundable tax credit as a payment. This is not that. This is a tax credit based on expenses. So if you have expenses for taking care of someone, then you could get a credit to cover up to and the the starting point in this bill is up to $2,500 in expenses for caring for somebody. And there's a list of qualified expenses, it's very similar in structure to the child dependent care credit, which is a federal credit that we also mirror in our state taxes. So, we've had some already some testimony on that. So it's it's structured in the same way. And it it slopes down after a $125,000 up to $175 $75,000 in income similar to the child tax credit and other tax credits we have. It slips down by $50 for each $1,000 of income. So, after $125,000 So, that's similar structure we've seen. There are some definitions that Kirby can go through and explain some of the the details of it and and also the expenses and and why these expenses are included. I worked really I tried really hard with the assistance of Kirby and also Pat Chittenden to address some of the concerns that we heard the tax department bring up last year about the administration. This should make it easier because it's a very familiar construct to them. And then there is another provision in the bill that was not in last year's bill,

[Maria Royal (Legislative Counsel)]: but he has an idea from a constituent of mine,

[Senator Ruth Hardy (Member)]: and this is actually related to the work we've been doing on property taxes. As you recall, for property taxes, there's a definition of household income and it's basically the income of everybody living in a household. So, if your mother moves into your household because she can't live by herself and you're her unpaid caregiver, she's a member of the household and her income would count for the household income for for calculations of the property tax credit or in the future if we do move to it, the property tax exemption. And what this would say is if you qualify for the dependent care credit that I just discussed, you can deduct your the income of the person you're caring for who's moved into your house. So your mom, if she's moved in, from the calculation of household income so that her income wouldn't push you above the threshold to qualify for the property tax credit. So, if you're making $60,000 and her income pushes you above the tax credit threshold, then, you can exclude her income if you are also applying for the caregiver tax credit. And I tied them together to make it easier for the tax department to understand who's eligible. So that, and it probably will be a narrow slice of people, but it would be property tax relief combined with income tax relief for people who are unpaid caregiver givers if they qualify for both. So that is the bill. We have to take it back for this tax year as have been drafted. And I mean, we heard a lot of testimony last year about the reasons for all of this, you know, from, I know, the AARP at the Alzheimer's Association and the Women's Women's Commission are all interested in the bill again. They all testified last year. Had my awesome student testify. I'm sure she would come back too. But we heard a lot of testimony last year and this is just about the same concept but a little bit different construct.

[Senator Randy Brock (Member)]: Question, now there's another tax bill and that's the one Martine you?

[Senator Martine Larocque Gulick (Member)]: Yep. You and I are

[Senator Ann Cummings (Chair)]: both Okay. Need some options.

[Senator Randy Brock (Member)]: Yeah. We're both. And, of course, you know, if they both pass, that's that they they really almost conflict one with the other. And I think our that's our intent is go with the winner.

[Senator Ruth Hardy (Member)]: Yeah. I mean, the other bill

[Senator Becca White (Guest, bill sponsor of S.204)]: is not a tax bill. Yeah.

[Senator Ruth Hardy (Member)]: The other is a is a grant for it's much more narrow. It's for people who are specifically for dementia caregivers. Correct. And this is broader. This is all unpaid caregivers. That would be a grant or pay for respite care. And this is a tax credit to cover expenses related to caring for

[Senator Randy Brock (Member)]: an individual. I think just the one thing that I would caution is that doing both may be excessive. If we do that then

[Senator Scott Beck (Member)]: I I agree.

[Patrick Titterton (Joint Fiscal Office)]: I think

[Senator Ruth Hardy (Member)]: that that's all in the big picture. You know, they're not the same population.

[Senator Randy Brock (Member)]: Understand. Yeah.

[Senator Thomas Chittenden (Vice Chair)]: I have a Bill two sixty nine. It's an exempting supplemental security income from the payments from household income determination for the property tax credit. It's somewhat falls into this arena. So, this does move forward, I'd love to just hear from the constituents that are advocating for that. I think that too is a small slice of the population but I think it's very relevant to what you're trying to do.

[Senator Ruth Hardy (Member)]: SSI? Is that Yeah. Okay. Yeah. I mean, it's it's similar. I think that would be a larger bit. Yeah.

[Senator Thomas Chittenden (Vice Chair)]: Yeah. Yeah. So the math is your raising your hand there.

[Kirby Keith (Legislative Counsel)]: Yeah. What

[Senator Scott Beck (Member)]: oh. So I'm along the lines of the I guess the Property tax credit. If we're thinking about it. So you wanna exclude the income of Say my mom moves into May.

[Patrick Titterton (Joint Fiscal Office)]: I take care of her.

[Senator Scott Beck (Member)]: Exclude her income from my

[Kirby Keith (Legislative Counsel)]: household income.

[Senator Scott Beck (Member)]: So what, you know, just logically thinking, saying, oh, I'm getting $40,000 in

[Patrick Titterton (Joint Fiscal Office)]: retirement, social security, whatever it

[Senator Scott Beck (Member)]: is, in theory, wouldn't that money be going to help me care and pay the bills and things like that?

[Senator Ruth Hardy (Member)]: It's possible. Now, just because you're excluding her income doesn't mean you're gonna automatically qualify for the tax credit because you probably make more money than you. You probably don't qualify for the tax credit if

[Senator Scott Beck (Member)]: you're just talking about you. I'm using your existing $60,000 Oh, see.

[Senator Ruth Hardy (Member)]: Yours is $60,000

[Senator Scott Beck (Member)]: But using your example earlier, say you make $60 or $70,000 and your mother who comes in makes, $60 every I see.

[Senator Ruth Hardy (Member)]: Okay. You're not talking specifically about it.

[Senator Randy Brock (Member)]: No. My mom was

[Patrick Titterton (Joint Fiscal Office)]: at home with my dad.

[Senator Ruth Hardy (Member)]: I think that, yes, one could make that argument. And I think that, you know, this is trying to get at, this is a service that is helping somebody stay out of a much more expensive, you know, long term care facility, whether it be a nursing home or an assisted living place that is a lot more expensive. So the the sort of benefits that you're providing by caring for your mom at at your home. Yeah. It's offsetting that.

[Senator Scott Beck (Member)]: But I'd imagine a parent moving in with a child that gets 60,000, say 60,000 would be helping with the expenses of the home they moved into, mitigating the effect of losing that credit, so to speak.

[Senator Ruth Hardy (Member)]: It's entirely possible, but this was just similar to what Senator Chittenden's bill was considering was but this is, I mean, is a narrow slice of people because they would have to qualify for the other credit in order to qualify for this credit so that the tax department can track them.

[Senator Scott Beck (Member)]: And does anybody know I don't know where I saw it.

[Patrick Titterton (Joint Fiscal Office)]: I'm hoping I'm not making it up,

[Senator Scott Beck (Member)]: but like a program where the

[Senator Ruth Hardy (Member)]: federal government pays you for caring for a family member? There's a program called Choices for Care, is through Medicaid, And you can, there was an article in the paper a little while ago, which you may have read, which I thought was really interesting. Yes, so Choices for Care helps people pay for nursing home or home health hospice or in some cases for an individual to pay to care for their own family member. There are specific income requirements for that and specific sort of types of care requirements. And you have to apply for it and qualify for it based on the income of your family member and the type of care you're providing. And it's a Medicaid program, so it is limited. And if they qualify for that and they're getting paid to take care, they wouldn't get this because this is for unpaid caregivers and that gives them considered paid.

[Patrick Titterton (Joint Fiscal Office)]: Okay, just curious if there's other avenues out there.

[Senator Ruth Hardy (Member)]: Are, there are, this is just broadly the avenues.

[Senator Thomas Chittenden (Vice Chair)]: Other questions before Kirby starts walking through the bill?

[Senator Ruth Hardy (Member)]: Kirby, you can correct me if I stay.

[Kirby Keith (Legislative Counsel)]: Okay. Been working six for for six for about eight weeks in a row now. I'm about to take my meds this afternoon, so I'm probably gonna sound a little different. Kirby Keith, legislative council. My plan here is to walk through the language we bill for you, S231. I have a little chart because as Senator Hardy mentioned, this is drafted to be a supplement to the Child and Independent Care Credit, which is a federal credit that Vermont also has a Vermont version of. It's meant to cover entirely different expenses on purpose than the CDCC, And so so the chart, I think, will help see the show you the difference there. And I'm also gonna touch on the federal changes to the CDCC under the HR one because I'm sure we'll be getting into these financial changes more in this committee later, but this is a good opportunity to show you a little bit of that too. So with that, we will move forward. An act relating to a family caregiver tax credit, the credit that Senator Hardy referred to from last year that was proposed was called the unpaid caregiver. This is different because it is no longer about unpaid care. It is about expenses incurred in taking care. So the the name was changed, family caregiver. So as far as the voice drafted, it's not directly trying to pay for unpaid care, even though the demographic being part of it is believed to be people who are not being compensated for the care they're providing. So we have a statutory purpose as all tax expenditures such as tax credits have to have, and then in section two is the credit. So this is a refundable credit, a Vermont credit, obviously. It's limited to expenses, as we said, that are one, qualified expenses, and we'll get into what that means under this section of law, but also expenses that are not creditable to the CDC. So right off the bat, you see that if if anything is claimable, whether you claim it or not, under the CDCC, then you cannot claim it with a spread. That goes to we'll we'll get into it with the chart, but the basics of the CDCC are those are expenses that are for qualifying person, which is a dependent child under age 13 or a spouse or older dependent physically or mentally incapable of self care. But that's limited so it's limited to dependents or spouses in some cases. And and those expenses also must be related to work or looking for work. So that means this credit would not cover those expenses If it's related to work or looking for work or if it's for independent, you would not be able to claim those expenses because there's already a credit for you to claim those expenses for. Moving on, the amount of credit available under this section is 30% of qualified expenses paid by the taxpayer for an individual with long term care needs. We'll get into what that means. Maximum credit for taxable year is $2,500 and then it's divided up for part year residents, prorated out. There's a phase out, as Senator Hardy mentioned, starting at AGI of $125,000 and that phase out ends at $175,000 After an AGI of 175,000, AFCAR would not be able to use this credit at all. The maximum allowed credit is inflated under this. Under subdivision C3 there. And then we get into the definitions. So activities of daily living. These are actually, I'm not going to go in alphabetical order because that makes a lot more sense when you see some of the other definitions. We'll start with individual long term care needs. The person being cared for has to be under this credit an individual with long term care needs. So they are at least 14 years of age, which as you because the CDCC is for 13 and younger, is related to the caregiver by blood, civil, merit, or adoption. You'll notice that does not mean dependent, it just means being related, unlike the CDCC. Has a medically diagnosed disability or health condition and does not reside in a residential care home, I would note there that the person may or may not be living with you. This is about expenses for caring for another person. It's not about whether they live with you or not, necessarily. More requirements: is unable to perform without substantial assistance from another individual at least two activities a day of living due to functional capacity or require substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment and is unable to perform without reminding or cueing assistance at least one activity of daily living. Some of some of these requirements come from proposed federal legislation that we passed. So just to let you know that that's there's there's an origin for some of these concepts. We didn't make this up entirely for the sake of this credit where this is borrowing from proposed federal legislation in the past for a similar super credit. With that, I'll revisit actually this bailout that they set full stopers.

[Senator Scott Beck (Member)]: Is back down a little bit. The

[Patrick Titterton (Joint Fiscal Office)]: daily playback. At least one is that cognitive impairment?

[Senator Scott Beck (Member)]: That's just like like a dementia or memory loss or

[Patrick Titterton (Joint Fiscal Office)]: something like that.

[Kirby Keith (Legislative Counsel)]: Requires substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment.

[Senator Scott Beck (Member)]: Again, like Alzheimer's where

[Kirby Keith (Legislative Counsel)]: Is that kinda like the that

[Senator Ruth Hardy (Member)]: realm is looking at that? Yeah. Alzheimer's or dementia or some kind of disability that's coming in there. And there are lots of other TBI.

[Kirby Keith (Legislative Counsel)]: Would TBI go? I would if if this needed to be interpreted, I think you could take a pretty broad interpretation of severe. I mean, is not but severe cognitive cognitive impairment. Any any impairment to your ability to think or or use your brain. But it has to be severe, and the the more measurable part of this, I think, is that they that they're they're impaired when it comes to at least one activity of daily living. And so what those activities of daily living are, are defined up here. That means tasks such as eating, toileting, grooming, dressing, bathing, and transferring, and meal planning and preparation, managing finances, shopping for food, clothing, and other essential items, performing essential household chores, communicating by phone or other media, and traveling around, participating in the community. So it has to be one of those things when it comes to both. Well, the E and F are important to apply that. The first four requirements are all together. You have to meet all of those. And then when it comes to E and F, it's one of the two, which may be or if we end up working on this drafting wise, maybe I should break those out into subdivisions to make that more obvious that we have an or at the end there. Maybe it should be e one or two. Let's re sign my own reaction as I go here. So, anyways, returning back to these ores, that's where the activity is daily living. So it's unable to perform without substantial assistance, at least two of those things we just read, or require substantial supervision to protect them and health and safety due to a severe cognitive impairment. In that case, only one of the activities needs to be something required to help. Going into qualified expenses. So these are the expenses for which you can claim as 30% of your expenses for the credit. Again, any expense that's covered by the CDCC already would not be something that you could claim. Qualified expenses means expenditures for goods, services, and supports that assist an individual with long term care needs when accomplishing activities of daily living. Main include reasonable expenditures for goods, services, and supports for the caregiver. So unlike the CDCC or at least parts of it, there could be some caregiver supports that are also qualified expenses here. Qualified expenses include expenditures relating to care such as respite care, adult pay care, counseling, support groups training, lost wages, or unpaid time off due to providing care as verified by an employer. So there is some loss of compensation due to work there, but it requires employer verification, which is something maybe part of the taxes would care about as far as the administration goes, how do you expect us to track this? You can require it to be verified by the employer, so they're going tell you about this expense here. Travel costs related to care and assistive technologies. These all should be expenses that have some sort of invoice or receipt associated with them that can be proven, which is meant to help with the administration of this. For purposes of this subsection, goods, supports, and services means and then you have these examples. I won't read through all of it, but these are all examples of goods, and supports, and services that would be allows qualifying expense. There is a provision that the commissioner taxes may require substantiation of the expense claimed and may deny a credit or a portion of the credit based on a lack of credible documentation. And then lastly, reinforcing the supplemental relationship between this and the CDCC waiver provision saying the taxpayer looking to claim the credit from the section may also claim this is Vermont's 5,828 C is Vermont's Child and Good Care Credit. They may claim that both provided all of the expenses under this section are separate and distinct from the expenses under the Child and Good Care Credit. Section three is the component of it that goes to the property tax credit, which if Act 73 proceeds as expected at this point, what will become the or the house line exemption instead of the property tax credit. But in either case, Vermont will continue to use household income as a way to determine when a person qualifies, and in this case, it changes the definition of household income to exclude a person residing in the household who meets the definition of individual with long term care need that we discussed before and also has a member of the household claiming that person to receive the credit that we're talking about before. So

[Senator Ann Cummings (Chair)]: if I'm a millionaire and I have long term care needs and would like my spouse to provide, my income can be excluded?

[Kirby Keith (Legislative Counsel)]: Or No. Probably not. Well, I mean, it depends on what kind of millionaire you are. If you're one that has a lot of income, no. If you're if you're one that has through some estate planning, maybe made it so that you have basically no income on paper, but you have a lot of wealth, then maybe.

[Senator Ann Cummings (Chair)]: Maybe. Okay.

[Kirby Keith (Legislative Counsel)]: But but part of like, this is written so that a member of the household has properly claimed a credit for you, but if in your scenario, your spouse who's wealthy would not be able to claim the credit because the you can't claim a credit if your AGI is over 75,000.

[Senator Ann Cummings (Chair)]: Okay. I missed the first part of this.

[Kirby Keith (Legislative Counsel)]: Yep. But up to an AGI of 175, a person can claim the credit and then could use this other card if you've got all the other

[Senator Ann Cummings (Chair)]: Anything say anything about long term care insurance?

[Senator Ruth Hardy (Member)]: No.

[Kirby Keith (Legislative Counsel)]: So that's it for the credit. The chairs here, I'll say my plan was to walk through the credit as it's proposed, and then the way that this credit is structured is that it's for expenses and it's for expenses that are not covered by the child dependent care credit. So I was going to show you a chart next to compare those two things so you can see the differences in the types of expenses that you can claim under each one.

[Senator Ann Cummings (Chair)]: Got about four minutes. Oh, do what? I thought we were gonna have time between. Yeah. Yeah. I've got Maria coming to the 40. Maria's here.

[Kirby Keith (Legislative Counsel)]: Alright let's get through this chart in four wheels here. The column on the left is the Vermont Child and Dependent Care Credit, which piggybacks off of the federal credit, and then on the right is the Family Career Tax Credit being proposed here. Let's jump to the second row, which is the maximum credit amount allowable. Under current law, this is not taking HR1 into account. The maximum credit's about 1,500. Actually, it does take HR one into account because HR one didn't actually increase the credit limits, actually. For that, you can say it's about the same. 1,500 is the maximum credit under the child's Medicare credit. This credit has a maximum of 4,500. To get that 1,500 credit for the Child Dependent Care Credit, would need at least two qualifying individuals that you're caring for, just so I'll note. Amount of, or the percentage of expenses that you can take a credit for under this credit, it's 30% of expenses. For the federal credit that flows through to Vermont, up until HR one, it was between 2035%. HR one changes that to 20 to 50%. I would note that the 50% level though is for the lowest of incomes. And since it's nonrefundable at the federal level, you can't actually claim 50% of expenses because you don't know enough tax to actually

[Senator Ann Cummings (Chair)]: use those. Is this refundable or not?

[Kirby Keith (Legislative Counsel)]: This is refundable.

[Senator Ann Cummings (Chair)]: This is refundable.

[Kirby Keith (Legislative Counsel)]: And the Vermont CD's the CD didn't refund.

[Senator Ann Cummings (Chair)]: And it would have to be over and above the federal tax credit. So a low income Vermonter would have to go to 50% even though they'll never be able to claim it, and then ours would be on top of that?

[Kirby Keith (Legislative Counsel)]: I'm not following which credits you're talking about there.

[Senator Ann Cummings (Chair)]: The one that's tied to the federal child dependent care credit. Our 30% is over and above that.

[Kirby Keith (Legislative Counsel)]: Ours, we are 72% of the federal credit for the child dependent care credit for the remodel. So if you're claiming 50% of your expenses the federal level, there's a cap that you that you would hit, and that would be what your corrected amount is, the federal level.

[Maria Royal (Legislative Counsel)]: Okay.

[Kirby Keith (Legislative Counsel)]: We allow 72% of it. The difference is at the federal level, if you hit that cap and but you don't actually have enough tax

[Senator Ann Cummings (Chair)]: Yeah. You don't get It

[Kirby Keith (Legislative Counsel)]: wipes out your tax debt, but then you you don't get anything back. The Vermont one would have would be refundable.

[Senator Ann Cummings (Chair)]: And that is 30% of the same expenses?

[Kirby Keith (Legislative Counsel)]: It's 72% of that federal credit on those same expenses. So it would be Yes, on those same expenses.

[Senator Ann Cummings (Chair)]: 30% of 72%.

[Kirby Keith (Legislative Counsel)]: No, it's just

[Senator Ann Cummings (Chair)]: Okay, we'll get Yeah.

[Kirby Keith (Legislative Counsel)]: It's just a one The 30% for this credit we're talking about, the important thing is, and the reason why on this chart, totally different expenses.

[Senator Ann Cummings (Chair)]: Okay. The new proposed credit. So, it's not, it's not the same expense.

[Kirby Keith (Legislative Counsel)]: The child dependent care credit, that's that's one thing to know about this proposal is all of the expenses that you can claim for child dependent care

[Maria Royal (Legislative Counsel)]: Yeah.

[Kirby Keith (Legislative Counsel)]: Are not covered by the family caregiver credit. It's different expenses.

[Patrick Titterton (Joint Fiscal Office)]: Okay.

[Kirby Keith (Legislative Counsel)]: Okay. So Vermont credit is refundable. This the family caregiver credit is refundable. Child dependent care credit has a phase down. There's no phase out. Once your AGI hits a certain amount, you can take only 20% of the expenses, but you can still take expenses. The Family Caregiver Credit has a phased out where once you hit 175 of AGI, there is no credit at all for you. The differences in who can receive care for the child dependent care credit, the qualifying person has to be a dependent child under age 13 for a spouse or older dependent physically or mentally incapable of self care. For the Family Caregiver Credit, the qualifying person must be over the age of 13 and related to the caregiver but not a dependent, has a medically diagnosed disability or health condition, and does not reside in an adult care home, and then has further restrictions on their ability to perform activities of daily living. Moving on, child dependent care credit. The person receiving care must be independent. For the family caregiver credit, It applies to a qualifying individual who does not meet the federal requirements, which means the person receiving care does not have to be an independent. And then the expenses that you can claim for the Child Dependent Caregiver credit must be related to work or looking for work. That is why most people use that credit for child care expenses because you're paying for preschool so you can go to work. Family caregiver credit is qualified expenditures that are not allowed under the federal CDCC, so anything that would be considered work related expenses would not be claimed under the Family Caregiver Credit. You would use your CDCC for that. So it would apply frequently, I would think, in cases where maybe the caregiver themselves is not working. And so currently, if a person's not working, they can't use the Child Dependent Care Credit even though they would otherwise qualify because of that looking for work requirement. With that, I'll stop and those are the differences. We do have a couple of co sponsors in addition to esponsor, obviously, Monique.

[Senator Ann Cummings (Chair)]: Okay. Okay. That's our first walkthrough. Anybody that would like to testify, just get your name and contact information to Charlotte. I'm gonna get you on any suggestions anybody on the committee has for who we should hear from. We'll get them on ASAP. Not sure how soon that'll be, but soon as we can. Okay. Thank you, Kirby. Sure. Okay. We are not, as I hope, going to get to make a decision on reports. Reports will all go away if we don't make a decision. So, they are playing hardball with us. So, anyway, we're gonna go on to the S-two zero four. This is an electric repair assistance and utility disinfection. Doctor. White is here just to give you some quick why I put this in and then Maria will help us. Hey, good job, Lou. I'm not even out of the room. I guess the electric disconnection isn't as That was an exciting thought. We don't usually do exciting things.

[Senator Becca White (Guest, bill sponsor of S.204)]: Well, thank you, Madam Chair, and thanks for having me back, seriously deja vu from last week. I have a bill for you to consider, S-two zero four, it's titled the Vermont Energy Equity Law. I'm not gonna go into too much detail on the individual sections, but a basic gist of the bill is that it would create a ratepayer protection program that would ensure that Vermonters who are low and moderate incomes, or have low and moderate incomes, that they could afford their electric bills. The program would discount the electric bills, depending on the income of the person paying. The program would pay for itself through a fee on higher income rate payers. And the reason for introducing this bill comes from my desire that as we phase out fossil fuels, that access to transitioning to electric use is affordable for Vermonters, especially when we have electricity energy burdens that are high. And it's actually interesting. The same percentage that the governor just said in his speech I had prepared today, which is that Vermonters face an 11% energy burden. So that means your costs are about for energy are about 11% of your budget. That's a that's a serious burden on Vermonters, and I can see that that's definitely a universal concern that we just heard from the governor, and that I would suggest is the large reason for this bill being introduced. It takes into account oh, hey. Look at that. Thank you. It also takes into account the rise in disconnects, which means someone's power shut off. So, actually, very first section of the bill goes into when you would have further prevention of disconnection, and what would actually prevent someone from having a disconnection happen. For example, adding periods of extreme heat, which you can imagine, even if you don't move forward with this bill in its entirety, I do hope you really consider protections for folks when it comes to disconnections for extreme heat, because air conditioners are a costly thing for a lot of Vermonters, and unfortunately, if someone has a disconnection during extreme heat event and they are older, that we have seen can actually cause the death of folks. So I really do hope even if

[Maria Royal (Legislative Counsel)]: you don't take up every part of this

[Senator Becca White (Guest, bill sponsor of S.204)]: bill that you consider that potentially in a miscellaneous bill or however that might work. I do wanna just draw your attention to the fact that this bill is supported by multiple environmental groups throughout the state, and the reason I introduced it was because of a Act three fifty Vermont node in South Royalton, who I believe they're watching. So thank you to the South Royalton node of three fifty Vermont for bringing this issue to my attention. And I would just end by saying that there is a study that you can review that was released on December 15. And while the study ultimately did not recommend moving forward with a ratepayer protection model for the state, I still think it's worthwhile for us to consider, and I would ask you to look at their recommendations as well, even if you

[Senator Ann Cummings (Chair)]: don't move forward with this idea. Now you have answered a question for me, which is why I got several handwritten letters from Royalton, which is not in my district. Hey, I got

[Senator Becca White (Guest, bill sponsor of S.204)]: some good constituents. They're active. They're gay.

[Senator Ann Cummings (Chair)]: I get very few handwritten penmanship, I hope. It was active. I have to read it.

[Maria Royal (Legislative Counsel)]: Ann Cummings. Thank you, Senator, for

[Senator Martine Larocque Gulick (Member)]: that presentation. I heard the governor talk about the 11% today, and obviously affordability is on all of our minds. Is that 11% for low income folks, or

[Senator Ann Cummings (Chair)]: is it an average? I

[Senator Becca White (Guest, bill sponsor of S.204)]: believe that's just the, that's a good question. We both pulled it out from another report, I don't know. I think it's on your, the average is like 11%. Thought I thought it was a

[Maria Royal (Legislative Counsel)]: lot less than Low

[Senator Ann Cummings (Chair)]: to moderate income from monitors. Okay.

[Maria Royal (Legislative Counsel)]: I mean, that would make sense.

[Senator Ann Cummings (Chair)]: Yeah, we'll definitely check

[Senator Becca White (Guest, bill sponsor of S.204)]: that one Yeah, you're, I think the point is well taken. My understanding is the energy burden is a higher amount for folks, typically, who are low income. Yeah.

[Maria Royal (Legislative Counsel)]: Because smaller income. Yeah. Okay. Thank you. Well, thank you for having me in, Jen.

[Senator Ann Cummings (Chair)]: You got another pill or ham?

[Senator Becca White (Guest, bill sponsor of S.204)]: Well, no, you got me earlier, but you know what? I'll come back if you want.

[Maria Royal (Legislative Counsel)]: No, that's okay.

[Senator Becca White (Guest, bill sponsor of S.204)]: So I can introduce, know, I'll go to

[Senator Ann Cummings (Chair)]: the most. I'm running out of time already, and it's only the second week, so it's all along. Okay.

[Senator Becca White (Guest, bill sponsor of S.204)]: And I'm actually going up to house government operations where we're getting

[Senator Ruth Hardy (Member)]: rid of all of our reports.

[Senator Becca White (Guest, bill sponsor of S.204)]: Oh, good. I know. So someone's doing some reports on it.

[Senator Ann Cummings (Chair)]: I think committee is going

[Maria Royal (Legislative Counsel)]: to have

[Senator Ann Cummings (Chair)]: to buckle down on it.

[Senator Becca White (Guest, bill sponsor of S.204)]: And thank you, Maria, for

[Senator Ann Cummings (Chair)]: You're welcome. Good job.

[Maria Royal (Legislative Counsel)]: Well, again, Maria Royal, the legislative council. And we'll do a quick walk through of the bill, which is s two zero four.

[Senator Ann Cummings (Chair)]: And I'm assuming that there are no fiscal notes because I was told they won't do one until we've taken up or already voted out.

[Maria Royal (Legislative Counsel)]: That's probably true, but I don't know. Yeah. I haven't

[Senator Ann Cummings (Chair)]: So, I'm assuming there are no fiscal notes on any of these.

[Maria Royal (Legislative Counsel)]: Well, the first part is about the disconnections, we'll get there. It's just the PUC amending its rule with some new requirements. So, the utilities can probably talk a little bit more about what the burden might be on them. And then the second part is basically a study, again, for the PUC. So no fiscal impact except with respect to whatever they come up with. But we'll go through so that you're just familiar. Again, the short title is the Vermont Energy Equity of Health. And then with section two, this is maybe the section that deals with the disconnections that were mentioned by Senator White. Section two zero nine on Title 30 pertains to the PUC's general jurisdiction over regulated utilities and subsection B, as you can see on line 17, pertains to required rules that the PUC require to adopt. So, are a number of items listed. I just want to draw your attention to what was Subdivision 3 on line 10 regarding the PC shall regulate and prescribe reasonable procedures used by companies in disconnecting or reconnecting services and billing customers. That's existing law. And based on that, PUC adopted rule 3.3, which specifically concerns disconnections of residential electric service, water service, and gas service. So the proposal here is for the PUC to amend that rule to specify that A, subdivision A, a physician certificate certifying that a ratepayer or resident within the ratepayer's household would suffer an immediate and serious health hazard by the disconnection of gas, electric or water service or by failure to reconnect such service, shall prevent disconnection or require reconnection as applicable and shall remain in effect for the time period specified in the certification unless the commission rules otherwise. So, the existing rule, there is a provision that says if a ratepayer or a member of the household would suffer some kind of serious health hazard, a physician certificate could specify to keep the service on for up to thirty days is what they're allowed to do under the certificate. It can be renewed once for a consecutive sixty day period. Beyond that, you need the PUCs for approval. I think you're allowed up to three months in a year for total. So, two consecutive months, three in one year. So, this basically would just allow for that requirement to not disconnect to remain in effect for the duration of whatever the certificate says, the physician says. So potentially

[Senator Ann Cummings (Chair)]: a much longer time period. And I'm gonna play devil's advocate. Yes. I guess I sat on economic development with too many landlords. If you get a physician's certificate and they can't turn off your electricity for the duration and the physician says for the duration of this person's life, they're gonna be hooked up to this machine, what prevents me from just saying I'm not paying? And and that's been a complaint from landlords. When you say people can't be evicted, then they say, well, I'm just not paying it. So that may be something to look at because these are regulated utilities. They are not being allowed to make an excess profit, So I assume any loss gets figures into the rates. The Just being

[Maria Royal (Legislative Counsel)]: raised here. Any cost, additional cost. I think that's a good point. The only thing I'll say is that this would be a rule making. So the PC would have to develop the rules no doubt if you go through landlords would be participating and trying to flush out what were the reasonable parameters. But you're right, it doesn't specify any Right. It doesn't specify here.

[Senator Ann Cummings (Chair)]: Talk about

[Maria Royal (Legislative Counsel)]: Well, says unless the commission rules otherwise. So, I don't know if that's specific to us.

[Senator Ann Cummings (Chair)]: I suppose they could say they're just not paying it, but they just bought a brand new sports car and Right. Yeah. So,

[Senator Martine Larocque Gulick (Member)]: Western And Central Europe for a long time, you know, temperatures were fairly temperate. They just didn't have air conditioning. And what they found over the last ten, twenty years as we've been, you know, been in the midst of climate change is that those heat spikes are really dangerous and they have lost many elderly folks. And I don't think these are folks necessarily who had underlying health conditions. They were just old. So I wonder, you know, this physician certificate, does that I mean, that's not gonna cover old people who are really vulnerable to high heat.

[Maria Royal (Legislative Counsel)]: Not necessarily, but I'll just draw your attention to the next subdivision Okay. Which answered this issue. So Subdivision B right at the top of the page. No gas, electric, or water utility may disconnect service to any residential rate there during periods of extreme heat as defined by the commission. So that's it gets to exactly that issue. So they would have to define what is extreme heat Mhmm. What length of time,

[Senator Ann Cummings (Chair)]: and so on. There was a statistic I heard that when the temperature got above 90, in the North started to die because we're not used to not going out as extreme heat. In the South, when the temperature got below 30, people started to die. Same thing. You just don't understand hyperthermia, and you don't have central heat, and you don't have face lining. So part of it is what you're used to. Mhmm. Part of it is probably you're old and you You've never had

[Maria Royal (Legislative Counsel)]: any personal line. No.

[Senator Ann Cummings (Chair)]: But, I mean, you in general, you just have never had Mhmm. You you don't have this is what my mother did when it got hot, that kind of thing. There's no culture tradition. Yeah. There's no culture for what you do when it's that hot. When I moved here fifty years ago, nobody had air conditioning in their cars. Nobody had air conditioning in their homes. You had a big fan and it dropped down to 60 every night, and life was good. That has changed. In March 12 was it twenty third no. Thirteenth. 1992 when we had the flood, the ice on the Winooski River was three to four feet thick. That ice hasn't been three to four inches thick in a lot of years. I mean, I I can show you pictures that was that thick, but that's how the the temperature has moderated. I don't mind not the week from zero, but it has moderate. So we do have these issues with extreme but not extreme cold. That's interesting because There is already.

[Maria Royal (Legislative Counsel)]: There is in rule. Right? There is during the winter months.

[Senator Martine Larocque Gulick (Member)]: It'd from November to March.

[Maria Royal (Legislative Counsel)]: There's some exceptions, but generally, there's some

[Senator Ann Cummings (Chair)]: protection already there. Because that's what we're used to. Yeah. Mhmm. Yep.

[Maria Royal (Legislative Counsel)]: And I did and I believe it's posted now. PUC rule 3.3 in case you wanna actually look at

[Senator Ruth Hardy (Member)]: it more specifically. Okay.

[Maria Royal (Legislative Counsel)]: So that should be under my name.

[Senator Ann Cummings (Chair)]: We'll have the PUC. We'll have the utilities in. Yep. And I think anybody from the public that is Vermont 350. Yeah. I'd like to come in or zoom in now.

[Maria Royal (Legislative Counsel)]: So the next section, section three, this is what Senator White was talking about. This is basically asking a PUC to design a program for low and moderate income household. One thing I just wanted to draw your attention to is you'll notice that section two zero nine c is an existing statute that's being amended. So that existing statute was enacted in 2006, and it was a very similar thing. It basically asked what was then the Public Service Board, now the commission, to design a program, an affordability program, and to submit that to the General Assembly in the form of draft legislation, as this proposal also does. I was curious, I went back and looked at the bill that they came up with, which I believe is S189, 2,007. You can see there, their draft legislation that does propose a statewide program, and they suggested modeling it after the universal service fund, which is the charge on your telephone bill that pays for a number of programs, mostly nine eleven, and potentially a gross receipts tax as well. So that obviously did not test. But I thought it was interesting just to see what they came up with at that time. Okay. But,

[Senator Ann Cummings (Chair)]: yep. But,

[Maria Royal (Legislative Counsel)]: but I don't wanna end there because they did do a study recently and I, I believe there's a different result. But in any event, we'll look at

[Senator Ann Cummings (Chair)]: The universal service fund is in trouble. That's the, yeah. Yeah.

[Maria Royal (Legislative Counsel)]: Okay, so in terms of what the PUC charged with doing, designing statewide electric rate payer protection program for low and moderate income households. The program shall be developed with the aid of an electric rate payer protection program collaborative and then the members of that collaborative, utility representatives, residential customers, consumer representatives, LMI program representatives, representatives from programs for the elders, Department of Public Service, Agency of Human Services, and other stakeholders identified by the commission. All of those people shall aid in the development of the program, including requirements for the implementation and funding of the program. Again, as I mentioned, that's submitted in the form of draft legislation and that will come to you next January. And so, in terms of, there are some specific things that are proposed here that should be considered with respect to the financial assistance. So, you can see those just scrolling down. It specifies that the program may include eligibility for customers at or below 300% of the federal property level. Two, where feasible, automatic screening and enrollment of customers. So, if they're in other programs in the state that they automatically qualify, for example, if they're on Lifeline or SNAP or Medicaid. Three, funding through customer charges, so ratepayer charges applicable to all ratepayer classes in an equitable or reasonable manner, including fixed or volumetric charges. And you'll see there's some cash proposed further below. Statewide funding mechanism that applies to all or most customers in the state, and that reallocates the funds collected to all utility service territories based on needs and not utility specific. It's a statewide program. Potential cap on kilowatt hours subject to the discount, exemptions from the charges. For example, for households that earn up to 80% of state median income,

[Senator Randy Brock (Member)]: a

[Maria Royal (Legislative Counsel)]: cap on volumetric charges that a ratepayer is required to pay, performance metrics, arrearage forgivenesses, administration on a statewide basis by a state entity, funding that results in the reimbursement of the net incremental program implementation costs incurred by the utility. They would be reimbursed. Then mechanisms that ensure that in cost savings realized by utility through reduced debt and collection expenses, commensurately benefit customers through reduced rates. So they actually end up saving money. Finally, as deemed appropriate by the commission, any other program will require to protect Vermont's most vulnerable households and their energy work as Vermont transitions to adjust and equitable clean energy.

[Senator Ann Cummings (Chair)]: When we get from the utilities, I would expect you might get some pushback from small municipal utilities and small enough town and have a lot of older people. They're not a big enough base to balance it out. We might have more concerns than being caught up. We got three or four. Senator Hardy.

[Senator Becca White (Guest, bill sponsor of S.204)]: Yeah, I just want

[Senator Ruth Hardy (Member)]: to echo what I think Maria and Senator White both said this. There was a report that came out, I think it was November 15 by the Caledonia Utility Commission or December 1? December 1. Yep. That talks about this issue. They have actually I I would start there. I will I will send it

[Maria Royal (Legislative Counsel)]: to you. And you requested in 2024 in the miscellaneous PUC bill, that the PUC do this study. Yes. Okay. And yeah. Yeah. That is available and yeah, we should

[Senator Ann Cummings (Chair)]: probably get this warning to Cheryl.

[Maria Royal (Legislative Counsel)]: I would forward it. The other thing that I could forward to you, efficiency Vermont has an energy burden report. That would also be helpful. I think the one that I saw online is from 2023. So I don't know if they have a more recent one.

[Senator Ann Cummings (Chair)]: Probably shouldn't check that off on our list of reports and say we don't want to receive it anymore. Correct.

[Senator Becca White (Guest, bill sponsor of S.204)]: I mean, it's a really helpful report.

[Maria Royal (Legislative Counsel)]: But I can send that as well. I'll try to confirm if it isn't that way you want have it.

[Senator Martine Larocque Gulick (Member)]: Quick question. When the bill refers to low and moderate income residential customers, is there a definition of low and moderate income statewide, or is

[Maria Royal (Legislative Counsel)]: that a PUC definition? Definition? That I think in here it specifies, is it up to 300? Yes, on page 400.

[Senator Martine Larocque Gulick (Member)]: Eligibility, Chris, below.

[Senator Ann Cummings (Chair)]: Somebody told us like 80% of the county median income are there's different definitions of information.

[Senator Martine Larocque Gulick (Member)]: So below 300% is considered for this bill low or moderate income. Yeah, correct.

[Senator Ann Cummings (Chair)]: And we'll get those numbers. We'll steal them all. Be healthy, bumpy, bumpy. Oh, right. Yes.

[Maria Royal (Legislative Counsel)]: We have that. Well, we don't have the shoes yet, I'll think.

[Senator Ann Cummings (Chair)]: That's true. May not that may be one of the statistics we're not getting anymore. Right. Okay.

[Maria Royal (Legislative Counsel)]: Okay.

[Senator Ann Cummings (Chair)]: Thank you. Yeah. I'm gonna We will take these out as soon as we plan. Alright. I understand. I thought we were gonna get. Patrick is here. Goodbye. And so Yeah. This is more important than report. I I'm getting the sense that no one would care if we don't send that in and all of the reports got discontinued. And then if we wanted them, we could ask for that. We are we're up in the bucket. We only have two pages. All in welfare has 13. Yeah. It's yeah. It's kinda Why anyone wants a report on deaths and hospice? I have no idea, but I've been saying that for seven or eight years. Come on. It's it's time. It's time. It's time. It's time. Good. We'll see if the chair will. That was my thing. That's why most people die at hospice. Isn't that what we have now? I guess they're trying to keep track of how many die at home as opposed to hospice. I think

[Senator Ruth Hardy (Member)]: it came out of when we did or I wasn't there, when you did, when y'all did the Death with Dignity Bill. That alone was it was part of that whole debate about hospice. I think that's where

[Patrick Titterton (Joint Fiscal Office)]: it came from. But that

[Senator Ann Cummings (Chair)]: makes sense. Well, we're gonna do income tax now. We're scintillating. And we've been looking at a couple things, so I thought it would be good to get a refresher as to what our tax rates look like. My sense is that our top bracket, which I've been told is only a quarter percent below Massachusetts millionaires tax, but ours starts at a much lower rate. And I'm starting to be concerned since we're hearing in health and welfare about the difficulty in attracting professionals, doctors, specialists who would probably fall into these brackets and all things must be revenue neutral, but it might be worth just because we haven't barked at this since we've looked at tax brackets and seriously during the tourist tax cut and jobs bill we wrote and And the first time we looked at it was through the blue ribbon tax commission, but their job was to make us more competitive with surrounding state, which is hard when New Hampshire has no advantage, but that was their order, that's what they were supposed to do. Floor is yours, Patrick. So, Pat, the

[Patrick Titterton (Joint Fiscal Office)]: Dictenden, the Fiscal Office. Madam Chair, think we can go one of two ways with this right now. So there are some slides posted on the committee page that we did look at together last year that is specific to looking at or comparing the personal income tax and property taxes. So there's that, but I also just have income tax 101 presentation that we could look at instead.

[Senator Ann Cummings (Chair)]: We could probably do 101. Other thing that's been brought up what would the income tax look like if we put replaced the property tax with the income tax? And I don't know if you can do that because the only proposal I've heard for tax the rich raises $70,000,000, is a drop in the bucket for the $2,500,000,000 end fund. But I think that's something it's been brought up enough, I would like to be able to put it to rest one point or the other.

[Patrick Titterton (Joint Fiscal Office)]: Sure, and I mean, I guess right off the bat, so I know you were actually on the study committee in 2010, I

[Senator Ann Cummings (Chair)]: believe '2, was it? Yeah, it was under Pearson, it was his last year here. The Education Income Tax? Yeah. That's right. Yeah.

[Patrick Titterton (Joint Fiscal Office)]: And so at the time, and you can correct me if my memory falters, what you all were looking at is if you replaced the net homestead amount with an income tax. And so thinking about that, what I did is I took Julia's most recent outlook. The net homestead education property tax there is about $720,000,000 projected for, fiscal year twenty seventh. What I then did would go into the, consensus forecast and look at what they were projecting for, sort of current law, personal income tax revenues, and that was 1,400,000,000.0. So if this was purely additive, and you weren't receiving to replace that income or that tax revenue 100%, that's essentially 50% increase in revenues overall in personal income tax. Okay, so we would Just

[Senator Ann Cummings (Chair)]: back of the envelope, it would be a 50% increase in your income tax. Right. Okay. And what would be the decrease in profit cost?

[Patrick Titterton (Joint Fiscal Office)]: So that, what I just mentioned is if you took the homestead property tax revenues, put them down at zero. Oh, okay. Yeah, so that's just maybe a sense of scale. Obviously

[Senator Ann Cummings (Chair)]: Well, think that's

[Patrick Titterton (Joint Fiscal Office)]: That will get to you.

[Senator Ann Cummings (Chair)]: I was getting the impression with the witness the other day that they thought, well, we're already moving over a 100,000,000 to buy the breakdown, so why not just put the whole thing on a broad on the income tax? And I'm saying, no. You're talking a lot more than 70 to 100,000,000.

[Patrick Titterton (Joint Fiscal Office)]: Yeah, and I mean, one thing to remember too is personal income taxes make up the largest source of general funding that we have. I think it may actually happen in the slides, but it's around 60% of total general fund revenue is from that one type. And that's what you use for standard levels of service for government operations. It's not specific to education or transportation. It's everything else. And we have always used property tax because, a, it's harder to hide a field than it is to hide income.

[Senator Ann Cummings (Chair)]: And we have very creative talents in this world. Fields. Property is property. It's pretty hard to hide it. It tends to be more stable over time than income. When we did away with the property, the general fund transfer, you put the sales tax in, the sales tax over time was about as volatile as the income tax, but if we go to income tax, then we have two fairly volatile, you wouldn't have a stable funding source when the economy went south. And the few of us that were here the last time it did, taking scissors to the safety net is extremely painful. And there was a lot of resentment that the schools got an increase and everybody else got hatched because of that. But we would have two main revenues to those systems would be about equally volatile and driven by the same forces.

[Maria Royal (Legislative Counsel)]: Is that math going to

[Senator Martine Larocque Gulick (Member)]: be something that we get to see or is that just, you know, to the back of the envelope?

[Patrick Titterton (Joint Fiscal Office)]: Oh, well, Julia's outlook is posted publicly. So, have that for the net loss test amount. And then the 1,400,000,000.0 is just from the consensus revenue. So that's all that is.

[Senator Ann Cummings (Chair)]: We have both documents if you want to. Well, okay. No cartoons in the consensus forecast.

[Patrick Titterton (Joint Fiscal Office)]: So like I said, there is some slides that are posted already that was specific to the education income tax. I believe those there for reference because it does touch on some of the things you're mentioning. And I'll send these slides, I promise I'll change the header, so it's percent of finance, when we're done here.

[Senator Ann Cummings (Chair)]: Yeah, and when we did that study, it's Scott, we were looking at keeping the property tracks and just say that the upper brackets had to pay at least 7% of their income than the lower brackets were. I don't remember that piece. Think it was Because what happened was when you hit the upper end, it said you had to pay based on income. The people at the lower end who had very low value properties were ended up paying more. Right. That that's what that's what kind of scuttled that whole discussion.

[Senator Thomas Chittenden (Vice Chair)]: Yeah. There's a whole class of people that that are actually paying on income Okay. More than a property because they're right now, they're come relative to their property values. They're a little bit opposite of Yeah. There's a lot of them, actually.

[Patrick Titterton (Joint Fiscal Office)]: They

[Senator Thomas Chittenden (Vice Chair)]: Yeah. They hang out around the 50 to $75,000 income range. Uh-huh. Yeah. Probably live in

[Senator Ann Cummings (Chair)]: a double double wide.

[Senator Thomas Chittenden (Vice Chair)]: Or Yeah. You know, a thousand square foot rent where Yeah. You know? Yeah. An inexpensive house, but they they actually have a lot. You know, they're making $7,580,000 dollars a year or something.

[Patrick Titterton (Joint Fiscal Office)]: Yeah.

[Senator Ann Cummings (Chair)]: So that's that's why that one didn't go. But this seems to be saying if we just raise the same amount of income on the income tax that we do on the property tax, then our problems would be solved. But if we have to raise our income tax rates by 50%, is that What was our top bracket? I mean, we're already the second highest in the country.

[Patrick Titterton (Joint Fiscal Office)]: So, I mean, you can set up whatever kind of bracket system you'd like, obviously. When you're talking about a 50% increase in just rates, you kept the same brackets, for example, particularly in some of those higher income individuals, you'd likely see some behavioral responses. There's kind of two that we usually think about. One is on the extensive margin, and an example of that would be moving to another city. There's also the intensive margin, which is where people will actually delay financial decisions, change how they report their income, things like that, which is called the extensive margin. Where we actually see in that to be the primary driver of loss of potential revenue, not loss of revenue, but when you increase, maybe it doesn't go up by as much as you think. So if you're talking about a 50% increase in rates, I think we realistically project that you're not gonna get 50% more income because there's going to be some elasticity that comes into I play with

[Senator Ann Cummings (Chair)]: think what's making me start to look at this is hearing that we are having trouble getting professionals. I've been told by businesses if we're looking at moving here and you understand our top executives are paying and your housing prices are, if they can find a house, and your property taxes are, that whole tax burden is making it very difficult to attract, and in many cases that puts us into hiring traveling services. In healthcare we're seeing that right and left. Hospital that is in the press is hiring its emergency service department is staffed by a company in Chester. That's what they do. Doctors get paid a salary, they get sent to your hospital, and you in many ways control and it costs more.

[Patrick Titterton (Joint Fiscal Office)]: You got it, right? I think I will maybe fairly add also, it's been a little bit of a mixed bag when we look at how it's worked out in some other states. So with California being one example, I think it was a decade or two ago, they had a very significant increase on sort of top back bracket rates. And that's where some of the research on the intensive versus extensive behavioral response comes from. So they did see, know, the exact dynamic research, they did see a loss in potential revenue due to some of those behavioral responses. However, recently, you've probably heard of the example of Massachusetts, where they were forecasting 75% half of what they actually ended up getting. So it is a mixed bag. Obviously, Massachusetts, it's still very new, right? So, you know, it's just one thing to think about when you're also caught. It's kind of a mixed bag with what you've seen happen in other states.

[Senator Ann Cummings (Chair)]: Yeah. How new was Massachusetts? Two years, Yeah. Three Well, I

[Patrick Titterton (Joint Fiscal Office)]: think they just closed their first fiscal year of collecting it. So and I think we're going into their second year. In in the first year, it did come in above their projections.

[Senator Ann Cummings (Chair)]: It takes a while for your accountant to alter things. And that was only on millionaires. So not everybody below that rate.

[Patrick Titterton (Joint Fiscal Office)]: Yeah, their tax code is structured much differently. It used to just be a 4% flat tax, and now with this new rate of another 4%, so eight total, that's on the Delphi Plus. No, and we don't have a flat tax.

[Senator Martine Larocque Gulick (Member)]: Have No.

[Senator Ann Cummings (Chair)]: Very graduated tax. Let's do one zero.

[Patrick Titterton (Joint Fiscal Office)]: All right, I will warn you in advance. I might try to move quickly because there are a lot of slides in here, but stop me at any point if I'm going too fast.

[Senator Ann Cummings (Chair)]: I'm just keeping them from having made a decision on the reports.

[Patrick Titterton (Joint Fiscal Office)]: I can eat into as much report time as you'd like.

[Senator Ann Cummings (Chair)]: No, I need to get in service with you.

[Patrick Titterton (Joint Fiscal Office)]: Okay, so for Vermont, our starting task point, you maybe recall this from two weeks ago when we were talking about some of the federal impacts. Our starting point is actually on a federal form called the ten forty. Hopefully you all submit this form every year. It's gonna have all your wage income, debt to income, you know, just dividends, rents, all those different kinds of income you can think of. They show up on this form. And on those lines, one is for 10, which I don't know if they're big enough for you to see. So really, once we get to this line 11, that's where we get into this concept of above the line or below the line in terms of federal changes that will flow through. We just pluck that line 11 right there, and, that's our starting point in Vermont. So like I said, starting point, federal adjusted gross income, that's line 11. We do add back a couple of things, bonus depreciation and interest on certain bonds, But then we do subtract some things. This is where we get below the line, so any changes at the federal level do not impact what you're seeing on the screen here. Vermont does have its own standard deduction that, as you referenced earlier, was in response to the Tax Cuts and Jobs Act, where they actually got rid of the personal exemptions and expanded the standard deduction. So Vermont's decoupled in that area. So you have your own standard deduction, own personal exemptions, and some other subtractions from income, social security exemption, one that we have being an example. And after all those subtractions, we have a Vermont taxable income, which is where we then start feeding income into the Vermont's income tax brackets. So you can see here I have two examples, a single filer and a married filer. I think these brackets are from tax

[Senator Ruth Hardy (Member)]: year '25.

[Patrick Titterton (Joint Fiscal Office)]: They do get adjusted for inflation every year. The rates don't, but the income amounts do. So you can see for very final jointly, right at around $300,000 in AGI or taxable income or AGI is where Vermont's top rate of 8.75% kicks in. And then you oh, here's all all the brackets. So, you know, we just used the example of Massachusetts. Just looking at top marginal rate doesn't actually tell you a whole lot about how a state's tax code is structured. They just you had a flat tax, now they have one other one. Vermont has several brackets. So at the very low end, those lower income earners are probably gonna be paying about 3.35%. But, you know, when looking at other states in New England, Vermont kind of sits

[Senator Randy Brock (Member)]: around the middle of the road.

[Patrick Titterton (Joint Fiscal Office)]: Both in Massachusetts and New York have a higher top marginal rate, although you will notice Massachusetts kicks in at a million. New York kicks in at 25,000,000. So their top rates are kicking in at much higher levels of income comparatively. But, you know, just going back to Massachusetts, if you are one of those lower income people who are in Vermont, you'd be taxed at 3.35%, they're gonna be getting taxed at a higher rate, that 4%. And of course, it doesn't tell the whole picture either, because we're not even thinking yet about exemptions that the state allows or credits like the child tax credit or the kid for an income tax credit. So again

[Senator Ann Cummings (Chair)]: Are those rates individual or a couple filing jointly?

[Patrick Titterton (Joint Fiscal Office)]: So these are for jointly. Maybe not to add

[Senator Ann Cummings (Chair)]: on jointly, so two ninety four. Yep. For a couple filing jointly. That's two teachers. Mhmm. Teacher and a superintendent

[Senator Thomas Chittenden (Vice Chair)]: Yeah.

[Senator Ann Cummings (Chair)]: In Chittenden County.

[Patrick Titterton (Joint Fiscal Office)]: I'm not making that.

[Senator Randy Brock (Member)]: I'm not doing it.

[Senator Ann Cummings (Chair)]: It's getting close.

[Senator Thomas Chittenden (Vice Chair)]: Yeah. Preaching to call system. Yeah. Okay.

[Senator Ann Cummings (Chair)]: I mean, I'm I'm just something probably won't go anywhere this year.

[Patrick Titterton (Joint Fiscal Office)]: Again, just remember, it's the top marginal rate, so it's really over an income above that level. Right. Your income below that level is gonna be hitting those lower rates, but you do have to pass through them. Trying to go being efficient, this is kind of looking at that same table in a slightly different way. This is again looking at top marginal rate on a national scale. Again, this doesn't tell the full story because it's gonna be hitting a different income levels.

[Senator Thomas Chittenden (Vice Chair)]: Previous slide. Why don't you have New York up there? I'm always just intrigued. The previous slide.

[Senator Ann Cummings (Chair)]: Because we have bought it.

[Senator Randy Brock (Member)]: New England states.

[Kirby Keith (Legislative Counsel)]: So

[Patrick Titterton (Joint Fiscal Office)]: This is just for New England states. What would your Well, I so I don't have it in front of me right now, but it depends on where you're living. Because if you're in your city, you're gonna have a municipal time. So I I do know that they have a little bit some prevalence of local taxes like that, which we don't have.

[Senator Thomas Chittenden (Vice Chair)]: Do do all the other do any of the other New England states have a local income tax?

[Patrick Titterton (Joint Fiscal Office)]: Like, the municipal level? Yeah. Not to my knowledge. Okay. I don't know if there's really Boston doesn't investment.

[Senator Thomas Chittenden (Vice Chair)]: So this is probably it then towards income tax.

[Patrick Titterton (Joint Fiscal Office)]: That would yeah. That would be my impression, but I'm happy to look at that. I just you know, the only other large sort of city that's in that area is gonna be Boston, right, sort of locally. And it's like need the city has been an economic driver to really attract and retain some of the just high energy. You know? So that's where some of that comes from.

[Senator Ann Cummings (Chair)]: In Massachusetts is intense.

[Senator Thomas Chittenden (Vice Chair)]: Yeah. You know? Yeah. They have a it's constitutional. They have

[Kirby Keith (Legislative Counsel)]: to have a flat tax or flat vibe. It To do

[Senator Ann Cummings (Chair)]: that upper one, they had to have a constitutional amendment.

[Senator Thomas Chittenden (Vice Chair)]: Do they actually have an amendment? Yes.

[Senator Randy Brock (Member)]: I think yeah. They have to vote if

[Patrick Titterton (Joint Fiscal Office)]: the state is proposing to raise revenue by 400%, I believe. Yeah.

[Senator Ann Cummings (Chair)]: We still have town meeting. My cousin was the moderator. That's an only good thing, too.

[Patrick Titterton (Joint Fiscal Office)]: So this is just, again, thinking about the progressivity of the block tax code. This is, It's not always just about we're gonna tax you less at the lower income level. We do actually have credits where we're actually sending money back to people, you know. There's earned income tax credit, child tax credit, child dependent care credit, all these credits. Vermont has a specific Vermont state level credit form. So again, that's another way that you do see sort of the slope of the progressivity of the curve steepen, meaning that the lower income people are actually paying zero or negative tax liability. I say negative, they're getting refund back as their credits. So, yeah, we have sort of three ways that we go about this. Are deductions and exemptions and credits. Exemptions and deductions reduce the amount of a taxpayer's income that's subject to tax, generally reducing their overall tax liability, whereas credits are dollar for dollar reductions of their tax liability. If you, I think I have an example here. There's two basic kinds of refundable one, an example of that being if the taxpayer's liability is $100 and they receive a $200 refundable credit, their tax liability goes to zero and actually get paid out that extra $100 as a cash refund. Non refundable, same liability and credit amount, wipe out the tax liability, but they don't actually get any cash back. I guess non refundability is sort of one way of maybe mitigating the scope of downward revenue risk. I don't know if that's kind of a jumbled way of saying that, but it is a tool that states or the feds will use to lessen cost risk.

[Senator Ann Cummings (Chair)]: And I know one reason we do refundable tax credits was because they don't impact your eligibility or things like SNAP. If we do other things, we find out it was the childcare cliff that if you got a raise or if you got thrown off, but it didn't count refundable tax credits. So we upped those, we could help lower income without causing them to lose more than they got.

[Senator Ruth Hardy (Member)]: Kirby, back to the conversation, sorry, Matt, Mattos. The not Kirby Pat. Thank you. That's why you were saying. Like, you're just complaining about the bat. Sorry. Pat. Patrick. Okay. Now I can't remember. Was gonna ask. Yes. Do you have any charts that have the the federal and state combined sort of the impact of the two tax systems combined because as the federal system becomes more regressive, it'd be interesting to see how it's changing the overall regressivity or progressivity of our tax system.

[Patrick Titterton (Joint Fiscal Office)]: So, one thing that I have seen very recently is, we actually had a live type payment and you know, do the who pays report. Yeah. So they came in, it wasn't for that report yet because I think that's not coming out quite yet, but, one of our analysts, Carl Davis, actually had done some analysis on Vermonters and, their average, bill change on their federal bill. So it's not combined, but it does give you a picture of, okay, we talked about the impact on PIPs not flowing through to the state because that's above the line. However, the doctors will be seeing a decrease to the tax liability. And so that's one way to look at sort of what that looks like. Mhmm. But We haven't overlaid it with

[Senator Ruth Hardy (Member)]: Okay. Because I know that the federal recent changes, just the federal tax code in general is much more, It's much less progressive than the than the state tax code. And so as this new bill, it you know, lowers taxes on the very wealthy at the at the federal level. You know, our tax system is not offsetting that as much as it was before that bill. Yeah. So, you know, there are people who are really, really wealthy that just got a big tax break at the federal level, and they have, therefore, more taxing capacity, one might say, because they're paying less taxes overall. And so it's I've never seen it overlaid and like how does and then for a state that's got a less progressive tax system, how does it impact? Yeah. The those those states as it makes their system even more regressive. So, it. Yeah. It sort of draws everybody to be less regressive, but Vermont's progressive tax system offsets it more than it would in another state. Sure.

[Patrick Titterton (Joint Fiscal Office)]: And I guess just two quick things to that. You know, we can always look at that in sort of a basic sort of limited scope this year, but it that's a very complicated

[Senator Ruth Hardy (Member)]: No. I'm sure it's extremely complicated, but it is the full picture.

[Patrick Titterton (Joint Fiscal Office)]: What we do have coming up this summer is JFO has to write the ten year tax study, which is a very thick report with a lot of tax information in it. And we could maybe look at something like that. I'm sure at some point I'll be back and talk to you about the report. We could mark it as sure if it didn't stop me.

[Maria Royal (Legislative Counsel)]: Yeah. Well, I mean, I just think

[Patrick Titterton (Joint Fiscal Office)]: it's

[Senator Ruth Hardy (Member)]: a more honest picture of people's tax picture when you're looking at federal and state together. Sure. And we kind of hyper focus, obviously, because we're state policymakers on what our state tax code is. But, you know, sometimes the bigger impact is what's happening at the federal level.

[Senator Randy Brock (Member)]: Okay.

[Senator Ann Cummings (Chair)]: I think the first tax cut and jobs State made $30,000,000 without raising any taxes, so we rewrote the tax code to give it back. It was mostly for middle class people. It's that $2,300,000 income group in there.

[Patrick Titterton (Joint Fiscal Office)]: And that's a

[Kirby Keith (Legislative Counsel)]: table with

[Senator Ann Cummings (Chair)]: that Yeah. They and they continued that because they can't deduct their state and local taxes, that they really didn't first time around, didn't benefit that much. A lot of the benefits flow through if you owned a business with the depreciation and things you could pass through and your business and the solutions we've seen again were you could pay those taxes through your business, but if you were just a professional who works on a salary, your position is different, and that would be just as we're thinking through, because you can use taxes to attract or detract people who is benefit, but a lot of the professionals, especially dual professional families, were getting, you know, they were getting hit because they couldn't do those deductions. And I believe that had got continued in the last bill. Still doesn't like new states, but that's also out there, is a major

[Patrick Titterton (Joint Fiscal Office)]: increase. They did increase the SALT cap from 10,000, could flexible for it, and most recent bill is 40,000 now. Oh, so you can deduct 40,000. That's temporary, isn't it? So much of the bill is temporary. Okay, yeah. Like the overtime tips, all that stuff

[Senator Ann Cummings (Chair)]: is temporary. The good stuff is temporary. The bad stuff doesn't start until after '26.

[Patrick Titterton (Joint Fiscal Office)]: The healthcare provider tax, which you'll become very interested in over time, Not necessarily phased in

[Senator Randy Brock (Member)]: over a period of time, yeah.

[Senator Ann Cummings (Chair)]: And that's in health and welfare. That's a major interest. That would be a major hit.

[Patrick Titterton (Joint Fiscal Office)]: Okay, here I just have a list of some of the exemptions and credits we have on the books. You did do a bunch of work on this just last year. So this just this might be slightly different. For example, the veterans credit is not on this list. The expanded military income. Exemption is not included on this list. There are this is not exhaustive, but these are certainly some of the larger ones. One thing that we do, make sure we're keeping track of how much all this is costing the state. I I do say costing, because the tax expenditure is like appropriation. You're opting to rather than spend the money, not collect it. But in the personal income tax world, these are from the the last tax expenditure report. You can see that the earned income tax credit is the biggest one in the space. And that's another one that you just expanded. So I would I think think the what we we wrote this report, and it came out in maybe till January, but then you all voted to expand both the earned income tax credit and the child tax credit. So these numbers would be closer to about 30,000,000 now with those expansions. They're still they're in the two biggest.

[Senator Ann Cummings (Chair)]: Do you have this for before the job Tax Cut and Jobs Act? Oh, sure. Because it would be interesting to look at there was 90% of the testimony in here was on the charitable tax credit that Vermont the original bills that came here didn't have. And

[Senator Becca White (Guest, bill sponsor of S.204)]: every

[Senator Ann Cummings (Chair)]: charitable organization in the state was absolutely sure that they were going to go bankrupt because if people couldn't do the tax deduction, they wouldn't they wouldn't donate to and it was so bogus that there wasn't a word about the medical expense deduction, which we didn't do anything on, and the next year we came back and did something minimal. So it'd be interesting to see what that slide looked like before we did the most recent. Did in fact charitable tax, charitable deductions stayed relatively stable? I think that, yeah, we played the child tax. Now that that may have come in afterwards, but it be really interesting to see how that worked out.

[Patrick Titterton (Joint Fiscal Office)]: Yeah, so the good news on that is we write this report every two years, so we can go back quite a ways to pull all those numbers. But yeah, the most recent changes, you've made some changes last year, but in 2022, that was when the tax credit was brand new, and you also expanded the EITC, and you also expanded Caledonia Credit. So, it's sort of a moving target over time, like what the tax law is and how it's structured, but, yeah, we can go back as far as we like.

[Senator Ann Cummings (Chair)]: Yeah. I mean, it'd just be interesting to see how that did play out. Just for information as we go forward into the future and they're trying to predict human behavior, which is what it is.

[Patrick Titterton (Joint Fiscal Office)]: Okay. So this is just kind of a summary of some of the provisions that were in the FAST Jobs Act. Obviously, legislature did respond to these. The state has its own standard deduction now, has its own personal exemption amount now. That was a response to things that were changing at the federal level. I'm not going to dwell too much on all of these pieces because I know we need to keep chugging forward, but they'll they'll be available to you for reference.

[Senator Ann Cummings (Chair)]: That was one of the recommendations of the original Blue Ribbon Tax Commission was that we go more to a standard deduction or many they were looking at New England states. You were allowed up to x amount or you were not allowed any deductions, but we were the most liberal state, I think. Yeah. We had the most, and I don't know that we've changed that much, but that was one of their recommendations, that that be cut back on. So

[Patrick Titterton (Joint Fiscal Office)]: So that was all sort of general overview of how your income tax is calculated, some recent legal changes. This next section is just all gonna be numbers and what personal income taxes mean to the state, and how that sort of breaks down by who's paying them. You can see here that with a couple of noticeable jumps, personal income tax receipts have been growing on a very steady trend line here. You do see that significant run up during COVID, but otherwise, it's generally steady progression upwards outside of the Great Recession. That's where we actually saw revenue decreases. Back in 2005, personal income taxes made up about 48% of general fund revenue. Today, it's more like 55%. Now remember, somewhere in there is also shifting sales and use out of the general fund, so that does skew it a little bit. But still, it's over half of what we rely on for general services that the government provides. So this is how it's sort of the distribution of who's paying how much breaks out. You can see that about 3% of tax returns are contributing about 42% of overall revenue in per personal income taxes. So that's that 300,000 plus income group there. And when you combine that with a a hundred hundred, and 50,000 plus, you know, 11%, we're talking about, upwards of 60% of general fund or sorry, not a general fund, of personal income tax revenues. So it is a large portion is concentrated amongst those higher. But one thing you will also notice, we were talking about credits earlier. Those particularly lower income Vermonters are due to actually have negative tax liabilities, moving debt through credits. They're actually getting more money back when they file their taxes than they're paying. And you saw that pie chart earlier, a lot of those are irrevocable credits like EITC, child tax benefit, what have you. Again, looking at the same thing a little bit differently, you can see that the general trend is that a number of, so the VARs, this is the number of filers that fall on that income group generally decreases as income goes up. I think we all sort of intuitively know that, right? But the inverse is true when you look at the total amount of personal income tax dollars. That's that orange line. That goes up with income. Number of pile, which goes down with income.

[Senator Ann Cummings (Chair)]: Yep.

[Patrick Titterton (Joint Fiscal Office)]: And again, looking at sort of what your effective tax rate looks like based on your income, you can see that it's really until about, where are we here, above $25,000 that we have an average effective tax rate above zero. And again, as income goes up, this gets to sort of the question that past legislators have thought about, that I'm sure you always think about is ability to pay. So the general thinking is that as income is higher, ability to pay goes higher, that's why you sort of see this decision, this policy decision to sort of have that line on an upward trajectory, more you make, more you pay, I guess the kernel there. Yeah, statewide effective tax rate is about 3.8. So that's personal income taxes. The rest of this presentation had to do with corporate, I think that means a little outside the scope of today's conversation. Yeah.

[Senator Randy Brock (Member)]: One thing though that is apparent on the chart that you had before is the effect of the loss of the high income person. That 3%, this is at '23, the year later, that 3% of the population pays 41% of the income tax. That's a survival of 9,800 people, I think it's 9,900 in And that's why it's so important, I think, to figure out if they make any change in this that does in fact increase income tax rates, how many people that would affect? Modeling that, I realize, is difficult.

[Patrick Titterton (Joint Fiscal Office)]: Yeah, there's kind of two parts to that. So we're talking about a small base. The number of filers is small, so the decision of a few of those filers is going to have more of outsized impact. Although going back to what I was talking about a little bit earlier and the idea of moving out of state response or just changing how you're reporting your income essentially, You know, that's been a bit of a mixed bag. There's you'll get people who will come and argue both ways too, I'm sure.

[Senator Randy Brock (Member)]: Guarantee. But, you know,

[Patrick Titterton (Joint Fiscal Office)]: based on, you know, a couple of examples I cited earlier with California, it seemed like there was something there, particularly when thinking about reporting of income. Then in Massachusetts, you kind of have the opposite side of the argument. Revenues were coming in well above projections. California did seem to be more of a statistical pattern in terms of there being a behavioral response.

[Senator Randy Brock (Member)]: Those are two sides. It would be actually interesting to look at states that have characteristics perhaps similar to Vermont. In other words, a high graduated income tax rate, something that has seen even other kinds of attractions that a Vermont would have as opposed to, and then other reasons for people leaving at the same time, other than tax rates in California, so many people left, but it wasn't solely because of tax rates. Then we started analyzing it. I'm just wondering if anybody's done this in any more depth, if anybody's done this and come to different conclusions. So you have people who have essentially different biases. It's not that everybody is unbiased who does analysis. For example, the Tax Foundation, I'd be very curious what they would say to it compared to deeper. I bet they've come up with different conclusions as to I

[Senator Ann Cummings (Chair)]: think Carl that was here last Thursday, he said that there was he gave us a name for one academic study. Mhmm. This is why we aren't allowed to talk about that in this committee because there's no data other than the. Publicities. Yes. And no and everybody believes what they believe. I think we could say that if two millionaires left, it would have a much larger impact Right. Than violence. Significantly larger impact. How many have to leave before and is federal tax cuts offsetting Vermont? I mean, they get to be very personal decisions. Do you have grandkids here? Do you you own a house in Florida and you could stay there two extra weeks and become a Florida resident?

[Senator Randy Brock (Member)]: Yeah. It's But it's almost the kind of thing that you you poll people who have left It could be and ask them why they left. That would be

[Senator Ann Cummings (Chair)]: Yeah.

[Senator Randy Brock (Member)]: Probably as valid as doing the statistical analysis. Let's start doing exit interviews. Yeah.

[Senator Ann Cummings (Chair)]: I don't think that's constitutional. No? You're right about that. Okay.

[Senator Randy Brock (Member)]: Exit interviews on the interstate.

[Senator Ann Cummings (Chair)]: This is a little scattered. Get it a little more focused as we double. No. Can't We have to do the reports.

[Maria Royal (Legislative Counsel)]: I can do that for homework. It's

[Senator Ann Cummings (Chair)]: been homework for a week, Terry. You haven't given up your homework. This, right? This is it. Yeah. Okay.

[Maria Royal (Legislative Counsel)]: I'm so

[Kirby Keith (Legislative Counsel)]: proud of it.

[Patrick Titterton (Joint Fiscal Office)]: Yep. I grab one. Let's not get too far

[Senator Scott Beck (Member)]: out over our skis here.

[Senator Ann Cummings (Chair)]: Alright, everybody pick. See, I have my checks. Have my check-in there.

[Patrick Titterton (Joint Fiscal Office)]: Agree with Madam Chair.

[Senator Ann Cummings (Chair)]: Well, everybody take it home. Tomorrow, you will turn that all in.

[Patrick Titterton (Joint Fiscal Office)]: K. Would you

[Senator Thomas Chittenden (Vice Chair)]: go