There are many reasons to love living in the state of Vermont: the picturesque sceneries, the tight-knit communities and even some of the progressive government policies. But there is a downside -- it’s one of the least friendly tax states in the country.
That’s according to Kiplinger.com, a retirement financial advisor firm that recently released its comprehensive guide to taxes on retirement income, property and purchases. Vermont made the list for Top 10 Least Friendly Tax States as well as the list of Top 5 States with the Highest Income Tax.
Other states on both lists were New York, New Jersey, Oregon and California. Kiplinger analyzed state sales tax, income tax, social security and property tax for each state to determine its rankings.
"Vermont doesn’t coddle retirees," Kiplinger stated in the release.
Not only does it tax most retirement income, including Social Security and out-of-state government pensions, it has a steep top income tax rate. These rates range from a low of 3.55 percent for up to $35,350 of taxable income for singles and $59,050 for married couples, to a high of 8.95 percent on income over $388,350 for singles and joint filers.
On top of that, Vermont has a 6 percent sales tax, and local jurisdictions may add 1 percent, and property taxes are among the 10 highest in the U.S., according to the Tax Foundation. For 2012, the base tax
The state does offer some real estate tax breaks for low income residents. Eligible Vermont residents can make a claim for a rebate of their school and municipal property taxes if household income is less than $97,000. There also is a property-tax exemption for veterans -- the first $10,000 of appraisal value -- for a qualifying veteran, surviving spouse or child.
In releasing its tax guideline, Kiplinger classifies its lists into The Good, The Bad and The Ugly, with Vermont being among the ugly ones. But there is an age-old saying that beauty is in the eye of the beholder.
Nobody likes paying taxes, but by Kiplinger’s own information it looks to us as if Vermont’s higher income tax rates are reserved for those with higher incomes, and while Kiplinger says Vermont property taxes are among the 10 highest in the country, the state allows tax breaks for low income residents.
There could be an argument made that these tax policies will lead to an exodus of Vermont’s wealthier citizens, leaving lower income taxpayers to shoulder a heavier burden. But often, with higher income comes greater empowerment in choosing where to live and the luxury of choosing quality of life over whether or not taxes are too high.
If some of these wealthier citizens really object to the taxes here they can always move to friendlier tax states like Alabama, Georgia, Mississippi and South Carolina. But we doubt any of these states would offer the same quality of life that attracts people to Vermont.