Legislation that would raise taxes on the top 1% of income earners in Vermont has no chance of becoming law this year, but some Democrats say they hope the proposal sharpens the contrast between them and Republican Gov. Phil Scott heading into this year’s midterms.
The House Committee on Ways and Means has spent the last three weeks crafting proposals that would raise income taxes on households that earn more than $586,000 a year. The plans, which would bring in anywhere between $62 million and $110 million annually in new revenue, also include a new tax on “unearned” investment income, such as capital gains from stocks.
Democrats want to use the money either to backfill federal health insurance subsidies that expired last year, or to lower income taxes for anyone making less than roughly $500,000 a year.
Brattleboro Rep. Emilie Kornheiser, who spearheaded a similar measure in 2024, said the conversation signals to Vermonters that Democrats are “grappling in really serious ways with income inequality.”
“Every year, we need to keep these issues front of mind as we look for a tax system that can be better for all of us,” said the Democratic chair of the House Committee on Ways and Means. “This might not be the moment where we’re going to make a difference for people because of the governor, who would veto such an action.”
Scott has, over his five terms in office, consistently opposed tax increases of any kind, including on residents Democrats say can most afford it. State income tax obligations for Vermonters making more than $1 million a year are already the seventh-highest in the nation, according to the Department of Taxes, which says the Ways and Means proposal would make Vermont the highest-tax state for those households.
Push them too far, Scott said recently, and they’ll depart for friendlier tax jurisdictions.
“You’re raising a tax on a group that I don’t think will pay it, because I think they’ll make a decision at that point as to where they live,” he said.
Scott said his stance is based on input from certified professional accountants such as Rick Wolfish, who recently retired after 40 years in the business. Wolfish said in an interview that Vermont — one of the few states that taxes Social Security benefits and has an estate tax — is already at a competitive disadvantage.
“I think this would be a disaster for the state of Vermont,” Wolfish said of the House proposals.
"If you are a senior who’s getting priced out of your housing, this proposal shows that we’re fighting for you."Barre City Rep. Teddy Waszazak
Officials from some of the eight states that have passed so-called “millionaire taxes” over the past 20 years have tried to alleviate concerns over tax flight. When Massachusetts voters approved a 4% surtax on all income over $1 million in 2022, critics warned “the sky was going to fall on our heads if we did this.” according to Phineas Baxandall, with Massachusetts Budget and Policy Center.
In fact, he said, revenues have wildly exceeded expectations. Massachusetts took in more than $3 billion from its millionaire tax in fiscal year 2026, money the state has used to fix roads and bridges, improve schools and lower child care costs.
“The actual revenue is in some ways the greatest proof in the pudding for the success of this … and not falling into the pitfalls of tax flight,” Baxandall said.
In an open letter to lawmakers and the governor last month, more than 20 high-income and wealthy Vermonters pleaded for the tax hikes.
“I know folks who are not of means who are having to leave the state because it’s so bloody expensive,” Renée Reiner, co-owner of Phoenix Books, said in an interview. “And if you’re a gabillionaire with a second or third home, I’m here to tell you, whatever tax burden gets tacked on, you’re not going to blink. It’s not going to make a whit of difference to you.”
Barre City Rep. Teddy Waszazak, a Democrat, said the One Big Beautiful Bill Act, signed into law by President Donald Trump last year, extended tax cuts that, according to one analysis, total about $200 million annually for the top 1% of earners in Vermont. Waszazak said Democrats need a defining message to voters. Taxing the highest earners in a moment when income inequality is intensifying, he said, shows low- and middle-class Vermonters that Democrats have their backs.
“If you are a single mom struggling to put food on the table, if you are a senior who’s getting priced out of your housing, this proposal shows that we’re fighting for you,” Waszazak said.
The tax proposal might not even get a committee vote this year, however, because Democrats are not a monolith on the issue. While House Speaker Jill Krowinski said this week that she supports the measure, members of her own leadership team have reservations.
House Majority Leader Lori Houghton said she thinks Vermonters, by and large, are wary of tax increases on their affluent neighbors.
“I think the politics of Vermont are very different from national politics, where in some places this could happen and not be a problem,” she said.
As Vermont Democrats strategize internally about how to bounce back from the historic losses they suffered in the 2024 election, tax policy will be one key aspect of that debate.
“It’s a fundamental question that we’re grappling with in a party that is pretty diverse,” Houghton said.
