As Congress passes tax overhaul, Vermont legislators brace for unknown

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Congressional Republicans achieved a major victory Wednesday afternoon with final passage of a massive overhaul of the federal tax code.

As the bill heads to President Donald Trump's desk for a signature, lawmakers and state officials in Vermont are bracing for potential impacts of the legislation, many of which remain unknown.

Vermont fiscal experts say they have not had time to assess the full effect of the tax code changes in the more than 500-page bill.

Top Vermont lawmakers expect to spend part of the upcoming session gauging the implications for state revenues and considering revisions to the state's tax system.

"I'm sitting here trying to work on my agenda for the first few weeks," Sen. Ann Cummings, D-Washington, who heads the Senate Finance Committee, said Tuesday afternoon. "The first thing we're going to do is try to figure out what's happening to us, and then we're going to go from there."

The three members of Vermont's delegation have remained resolutely opposed to the bill, and all voted against it. No Democrats or independents in either chamber voted for the legislation.

The bill provides significant tax cuts for corporations and temporarily reduces individual income tax rates. It eliminates the individual health insurance mandate, a key part of the Affordable Care Act.

Proponents promise the bill will put more money in American families' pockets, but critics say the benefits are concentrated among the country's top earners.

"Today we are giving the people their money back," Speaker Paul Ryan, R-Wis., said on the House floor Tuesday.

The bill was poised for final passage in the Senate late Tuesday but took a detour back to the House because three provisions violated a budget rule in the upper chamber.

Sen. Bernie Sanders, I-Vt., ranking member on the Senate Budget Committee, led a point of order over the provisions, forcing GOP leaders to edit the bill. The move delayed final passage to Wednesday, because it required the House to vote a second time on the tweaked bill.

The Senate passed the bill 51-48 Wednesday, shortly after midnight.

Both Sanders and Sen. Patrick Leahy, D-Vt., were opposed.

With a final vote early Wednesday afternoon of 224-201, the House sent the bill to the president.

State unclear on full impact

The federal tax bill's passage comes less than two weeks before Vermont lawmakers will return to Montpelier. Fiscal experts are still working to gauge the collective impact of the bill on the state's finances and on Vermonters.

State officials say changes at the federal level on taxes for pass-through businesses, the doubling of the standard deduction and more could affect how Vermonters file their taxes and therefore affect state revenues.

Lawmakers are prepared to spend part of the upcoming session considering changes to Vermont law in reaction to the federal legislation.

House Ways and Means Chair Janet Ancel, D-Calais, met this week with legislative experts to go through a summary of the bill that was 2 inches thick, she said.

"My first thought about it is really that if their goal was to make the system simpler, they failed, and if their goal was to make it more fair, they failed as well," Ancel said.

Some provisions in the federal bill may have an indirect impact on state revenue by changing how Vermonters and Vermont businesses behave, according to Ancel.

The state has largely decoupled its tax system from the federal rates, and the remaining ties could be under scrutiny, she said. She advocates going it alone.

"The less we're tied to the federal tax system, the more we're able to control what happens to our citizens and our own revenue," Ancel said.

Cummings said state lawmakers are in a "reactive stage at this point." She said it is not clear how the package will affect state revenues and Vermonters as a whole.

"It's going to have to all sugar out before we can say, yeah, this is what it's going to do to us," she said.

Cummings said she is concerned with equity in the tax system and scrutinizing whether the federal tax reforms will change Vermont's system.

"If the effect is that wealthier people are going to be paying less and middle-income people are going to be paying more, I think we might want to take a look at that," she said.

Stephen Klein, of the nonpartisan legislative Joint Fiscal Office, said analysts are in the early stages of assessing the impact of the bill.

It's difficult because to get a clear picture, analysts need to consider how multiple changes will interact, he said.

For instance, analysts are still working to calculate what the doubling of the standard deduction in the federal bill means for Vermont's revenues, he said. They also need to consider the impact of the elimination of some personal exemptions.

"It's not going to be a simple process," Klein said.

Vermont Tax Commissioner Kaj Samsom said he expects that on average, people in the state will see a lower federal tax bill.

"Most Vermonters are going to be paying less in federal income taxes — you know, being very general," Samsom said.

Some Vermont families could stand to benefit from the doubling of the child tax credit to $2,000, he said.

Samsom noted that the final package allows people to deduct state and local taxes, including income and property taxes, up to $10,000. That could affect how many Vermonters itemize, he said.

The commissioner is also watching for how the changes for pass-through businesses will affect the state.

Economists for the Scott administration and the Legislature are expected to present more information about the implications of the federal tax bill at a semi-annual Emergency Board meeting in January.

In the meantime, the state is "warming up the calculators" to get a full grasp of the impacts for state revenue, Samsom said.

"It's all pretty fresh," he said.

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