Taxes: 1. How High Are Vermont State Taxes?

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Taxes

Vermont has some of the highest tax rates in the country.

The state individual income tax rates range from 3.55% on the first $37,450 of taxable income, then 6.8% on the next bracket and ultimately up to 8.95% on anything over $411,500.

Corporate taxes range from 6% to 8.5%. The sales tax is 6%. Capital gains taxes ratchet quickly up to 9% and there is a punitive capital gains tax on short-term real property gains. Vermont’s inheritance tax ratchets up to 16%, so you should think long and hard before dying there.

Both the Vermont Legislative Joint Fiscal Office and the Federation of Tax Administrators report that Vermont’s per capita state tax burden, $4,917 in fiscal year 2016, is the second highest in the USA.

 The Tax Foundation, a non-profit organization, has been compiling data on state and federal taxes since 1937. It ranks Vermont’s key taxes as follows:

Property Taxes: Vermont is the fifth highest state, with a mean effective property tax rate of 1.70% on owner-occupied homes (The Informed Vermonter pays way more than this in Randolph)

Individual Income Taxes: Vermont is the fifth highest state with a top marginal tax rate of 8.95%

Corporate Taxes: Vermont is the eighth highest state, with a top marginal tax rate of 8.5%

Sales Tax: Vermont is the 36th highest state with a 6% sales tax rate.

Inheritance Tax: Vermont is one of only 19 states with an estate/inheritance tax.

Gasoline Taxes: Vermont is the 19th highest at 30.46 cents/gallon

Cigarette Taxes: Vermont is the 6th highest at $3.08/pack

The Federation of Tax Administrators has similar rankings for tax rates in effect in 2017, with Vermont’s highest individual income tax rate and corporate tax rate ranked as the sixth highest in the country, the sales tax ranked as 12th (with quite a few other states also at 6%), gasoline taxes as 13th and cigarette taxes at 6th.

Calculating the state’s tax burden on a per capita basis paints a similar picture.  The chart below compares Vermont’s total per capita tax burden to the all the other states of the country.

Comparative Per Capita State Tax Burdens, 2015 ($)

 

  Vermont USA Average Highest State Lowest State
Total State Tax Revenues 4,861 2,851 7,583 1,170
Personal Income Tax Revenues 1,133 1,052 2,279 000
Corporate Tax Revenues 180 153 433 000
State & Local Property Tax Revenues 2,342 1,451 3,058 521
Sales Tax Revenues 1,296 1,314 2,550 185

Source: Fiscal Facts 2017, Vermont Legislative Joint Fiscal Office. Note that the Total State Per Capita tax burden reported by Fiscal facts is 1.5% higher than calculated earlier by The Informed Vermonter using CAFR information.

 

Key Observations

Very High Total Tax Burden: As reported in Legislative Joint Fiscal Office, Vermont’s per capita total state tax burden is the second highest in the USA.

Not All State Taxes Are Paid By Residents Of Vermont: A material portion of Vermont’s total tax burden is paid by non-residents. Tourists pay sales, gasoline and meals & room taxes. Non-residents pay property taxes on their Vermont vacation homes, at higher rates than residents.  The Informed Vermonter doesn’t know if Vermont “exports” more of its tax burden than other states.

High Income Tax Rates: Top marginal tax rates for both individuals and corporations are among the highest in the USA and per capita taxes from these sources are higher than the USA average.

Very High Property Taxes: Property taxes in Vermont are particularly high, with Vermont’s per capita state & local property tax burden exceeding the national average by 61%.

 

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