Race Day Live MONTPELIER, VT – Lawmakers in Vermont are working on a new plan that could end state taxes on Social Security benefits.
The bill, known as H.74, is being pushed by state representatives Daniel Noyes and Jim Harrison, who believe the change would help retirees struggling to afford their expenses.
Right now, Vermont is one of only nine states that still tax Social Security income. The bill has received strong support, with 60 legislators from both political parties backing it. Supporters say this move will help older residents keep more of their money, making Vermont a better place to retire.
How Does the Bill Work?
The plan wouldn’t remove Social Security taxes all at once. Instead, the bill proposes gradually increasing the income exemption over eight years until benefits are fully exempt by 2034.
In the first year, Vermont would increase the income exemption threshold by $15,000 for both single filers and married couples.
Over the next few years, the exemption would increase by $12,000 and $10,000 each year until Social Security benefits are no longer taxed at all.
“We’d love to repeal the tax immediately,” said Rep. Jim Harrison, “but this approach is a fiscally responsible way to do it.”
Why It Matters for Vermont Retirees?
More than one in four Vermont residents rely on Social Security for their income, according to Mary Hayden, Executive Director of the Vermont Association of Area Agencies on Aging.
She believes removing the tax would help retirees afford basic needs, making Vermont a more affordable place for older people.
“This bill is an important step in ensuring seniors can continue living in Vermont without financial stress,” Hayden said. She also pointed out that retirees would have more money to spend locally, which could help Vermont’s economy.
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Governor’s Budget Suggests a Smaller Tax Cut
Governor Phil Scott recently released his 2026 budget proposal, which also discusses reducing taxes on Social Security income. However, the governor’s plan is less generous than what legislators are proposing.
His plan would only increase the exemption by $5,000—much lower than the $15,000 increase in the first year suggested by lawmakers.
This difference means the debate is far from over. Some lawmakers believe the governor’s proposal doesn’t go far enough in helping retirees, while others argue that a smaller tax cut is more financially responsible for the state.
What’s Next?
Right now, H.74 is under review by the House on Ways and Means Committee.
If it moves forward, it will need to pass multiple votes before it can become law. If approved, Vermont residents could start seeing the first phase of tax cuts in 2026.
For retirees in Vermont, this bill could mean keeping more of their hard-earned benefits and having better financial security in the years ahead
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