In a significant shift in state tax policy, a wave of new legislation is being introduced across the United States, with Vermont at the forefront, aiming to address income inequality through heightened taxes on the wealthy. Reflecting a growing national trend, Vermont lawmakers, led by State Representative Emilie Kornheiser, are proposing novel tax measures targeting high earners and substantial wealth.
Kornheiser, chair of the Ways and Means Committee, spearheads two ambitious proposals. The first seeks to tax individuals with over $10 million in net worth on unrealized capital gains, a pioneering approach in state taxation. The second introduces a 3% marginal tax on incomes exceeding $500,000. These measures, proponents argue, could significantly bolster Vermont’s budget, adding nearly $100 million, and rectify what they perceive as an inequitable tax burden shouldered by middle-class residents.
This initiative in Vermont is part of the larger “Tax Justice Initiative,” which echoes Senator Elizabeth Warren’s federal wealth tax proposal. After the failure of similar bills in seven states last year, advocates are redoubling efforts, encouraged by growing public discontent over income disparity and the perceived tax privileges of the ultra-wealthy. A recent Pew Research poll reflects this sentiment, revealing that 82% of Americans are troubled by the wealthy’s tax contributions.
However, this push for wealth-based taxation faces staunch opposition. Critics, including some Democrats and Republicans, argue that taxing assets and unrealized gains could deter investment and economic growth. Governor Phil Scott of Vermont, a moderate Republican, echoes this concern, questioning the efficacy and fairness of further taxing the wealthy.
Amid this debate, a new coalition, Fund Vermont’s Future, is advocating for increased income taxes on households earning over $500,000. This approach, they argue, is vital for addressing rising income inequality and funding essential public services. The coalition, consisting of various interest groups, draws inspiration from similar movements nationwide, like Massachusetts’ “Millionaires Tax.”
With the U.S. Supreme Court considering a case that could redefine taxable income, the legal viability of these state-level tax reforms remains uncertain. Meanwhile, the conversation about fair taxation, once a national discourse, is increasingly being taken up by state legislatures as they become testing grounds for progressive tax policies. The outcome in Vermont could set a precedent for other states grappling with similar issues, signaling a potential shift in how America addresses wealth disparity through taxation.
