Finally, there may be some relief for Vermonters who collect Social Security or military pension benefits. Governor Phil Scott has proposed a critical tax change that would impact the household budgets of thousands of older Vermonters and veterans. This proposal aims to eliminate the taxation of Social Security benefits for many Vermonters. Vermont is one of only 12 states in the nation that taxes Social Security benefits. Most don’t tax them at all. In addition, Governor Scott proposes to waive the taxation of veteran pension benefits – long overdue!
AARP Vermont is working with the Administration and state leaders to relieve this tax burden and restore fairness to the taxation of Social Security and veterans’ benefits — without breaking the bank. Working and retired Vermonters have already paid into Social Security as a tax on their paycheck — do we need to tax them on the benefits they need to survive? With some 143,000 Social Security beneficiaries in Vermont coupled with the decline of traditional pension plans, the time has come to at least reduce the hit on these older taxpayers. The Scott Administration supports the idea, and our legislators are taking up the issue right now.
Vermont’s population is one of the oldest in our nation and these changes will help to improve the quality of life for Vermont seniors. This demographic block consumes a very substantial amount of Vermont products and services, so these funds will go right into the Vermont economy. Also, in planning for retirement, savvy older taxpayers eying retirement understand what various states have to offer them in terms of affordability — and most impose less of a tax burden than Vermont. We need to keep them here!
Military retirees, who often retire while still in the prime of their work lives, are also savvy with respect to what various states have to offer. Presently, Vermont is one of only 3 states that fully taxes military pensions. Exempting 100 percent of military retirement pay from Vermont’s personal income tax will encourage more of this these vets to come to Vermont, or to stay, to take up new careers here, to raise their families, and contribute to Vermont’s economy.
Unfortunately, today, too many Vermont workers haven’t saved enough for retirement and will be more reliant on Social Security than their parents and grandparents were. Social Security tax reductions are part of AARP’s overall strategy to improve financial security. As the nation’s second oldest state, preserving household income is especially critical going forward.
Providing Social Security and pension tax relief is a matter of fairness for low- and middle-income retirees and all veterans — and it’s an investment in the financial security of Vermonters for years to come. Our legislature should not pass up a chance to help protect our seniors and their families – and keep Vermonters at home.
Greg Marchildon is the AARP Vermont State Director.