Sneaky tax takes some by surprise

MIDDLEBURY | This year, some Vermonters are paying what amounts to a new, stealth income tax. That's the word from Vermont tax expert Steve Cairns, owner of Advisor Tax Services in Stowe. He says some of his clients are finding out that a significant tax increase is lurking in this year's tax filing. Recent changes to U.S. tax law have prompted a $32 million increase in Vermont taxes, he said. "There is a subtle but dramatic change to the income tax law that is now resulting in a noticeable increase in Vermont taxable income for many taxpayers," Cairns told The Eagle last month. "The change is the removal of all federal deductions that remain for federal taxpayers. "Virtually everyone that I have talked to, including legislators, had no clue these changes were coming," Cairns said. Cairns discovered the stealth change when he examined several documents prepared by the Vermont Legislative Joint Fiscal Office — but few know about the increase. "It was never revealed directly what the impact that this simple change would have on many taxpayers," he said. In Vermont, changes to state itemized deductions have been going on for some time. In 2009, Vermont limited the state income tax deduction to $5,000 on the income tax return. In 2015, the Legislature limited the deduction again. "In 2015, Vermont removed the deduction entirely, then capped the remaining deductions to 2.5 times the federal standard deduction," Cairns said. "Last year, they got rid of it all. It was a three-step process. "I think that's why you didn't hear a peep from the Vermont legislature about the SALT [state and local tax] deduction at the federal level like we heard from New York, New Jersey, Illinois and California. They were panicking, all trying to come up with various Mickey Mouse ways of making charitable contributions instead of paying their property taxes." Cairns said taxpayers who itemize their tax deductions — those who don't take the standard deduction — can deduct what they've paid in certain state and local taxes. These deductions include property, income and sales taxes. But in February of 2018, Cairns got an email from Vermont Tax Commissioner Kaj Samsom that indicated an elimination of itemized deductions. "The proposal to get rid of the deduction seems to have come from the administration," Cairns said. "The Vermont law effectively begins the Vermont tax calculation with federal taxable income, a number that increases significantly for most taxpayers in 2018 as a result of the federal changes." Some residents have already found out how much more they will be paying when they opened their new property tax bills. According to Cairns, new Vermont tax legislation (Act 11) was allowed to go into law unsigned by Gov. Phil Scott last year. The act contains numerous changes affecting income tax and property tax. Note: This story also appeared on True North Reports.

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Sneaky tax takes some by surprise

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