Republican Gov. Phil Scott, left, and Democratic nominee for governor Amanda Janoo. Photos by Glenn Russell/VTDigger The leading candidates for governor of Vermont this year agree that the state is unaffordable for too many people. But Amanda Janoo and Phil Scott have different ideas for how to solve that problem — and say each other’s plans won’t cut it.  Janoo, the Democratic nominee and an economist from Burlington, says a key part of her agenda is raising new revenue for state services by increasing income taxes on Vermont’s wealthiest residents, as well as boosting taxes on some second homes and large technology companies. Scott, a Republican who is running for a sixth term, says he’d do nearly the opposite if he gets reelected: propose a package of tax cuts or credits. He has already directed the heads of state agencies to prepare spending plans for the upcoming fiscal year that account for less state revenue, anticipating the possible impacts of levying lower taxes. Two years ago, frustration over rising property tax rates to pay for schools was the animating issue in Vermont’s elections for statewide offices and seats in the Legislature. This year’s election raises a different — but related — question, said Alex Garlick, an associate professor of political science at the University of Vermont: Will voters elect a governor who’s pitching more taxes to pay for a broader array of public services? Janoo has proposed, for example, using new tax revenue to make sure everyone in the state can see a primary care doctor, free of charge. She hopes this sets Vermont up to implement a system where all healthcare services are free, as it tried to do more than a decade ago, only to abandon the effort after determining it wasn’t financially feasible. “I think there is consensus that affordability is a problem. And healthcare is a major part of that. But the approach of how to get out of that is unclear,” Garlick said.  In Janoo’s primary win over the childcare advocate Aly Richards, he added, one of the key differences was Janoo didn’t shy away from saying that she supports new taxes. “And I see this election as kind of a litmus test on that,” Garlick said.  The governor argues that his so-far unspecified tax reduction plan will put more money in Vermonters’ pockets and encourage more people to move to the state. Only with a larger tax base can Vermont solve its biggest challenges, he said, which include the high cost of healthcare as well as a lack of workers and housing they can afford. In contrast, “why is their answer to every problem always another tax, fee and more spending?” his campaign said in a social media post last month, referring to Janoo and Democratic leaders in the Legislature. “That’s what got us into the affordability crisis and no amount of new spending or higher taxes is going to get us out.” But Janoo — who says some details of her tax proposals will need to be worked out in the future — thinks Scott’s decade-long refrain as governor against new taxes and fees hasn’t helped the state make progress. She says the state already has access to the resources it needs to solve its biggest challenges, if only it would better use them. “Phil Scott’s definition of affordability is tax cuts. My definition of affordability is: How affordable is your life? And, you know, basic needs?” she said in an interview. “Taxes are one of the levers, or tools, that we can utilize as a way to achieve that.” Taxing the rich Janoo has sustained support for an idea that’s made inroads with left-leaning members of the Legislature in recent years: raising taxes on high income-earners. This year, a version of the proposal got significant airtime in a key House committee but ultimately did not have enough support from Democratic leaders to advance beyond that. Her campaign has proposed a 2% tax surcharge on personal income over $250,000 and an 8% surcharge on personal income over $500,000. Together, these measures would raise $344 million in state revenue each year, according to estimates from Fair Share for Vermont, a group that has lobbied in Montpelier for those proposals. Janoo was part of that advocacy effort before running for governor and says her proposals are based on the group’s modeling. Revenue garnered from the surcharge plan would effectively replace, in Vermont, the tax cuts included in last year’s Republican-led federal tax and spending law, according to Fair Share for Vermont. Broadly, Janoo said her goal is to use the surtax revenue to fund primary and preventive healthcare for all Vermonters, regardless of their insurance coverage. She’s previously estimated that such a system would cost more than $300 million. Janoo said in an interview, though, that the details of which services the surcharge would pay for would need to be worked out with legislators after she was elected.  Vermont would not be the first state to raise income taxes on wealthy people. Several other states, including two in New England, have similar policies in place. Since 2023, Massachusetts has had a 4% surcharge on income over $1 million; and starting this year, Maine has levied a 2% surcharge on income over the same amount.  If Vermont’s goal is to bring in as much new revenue as possible from a new tax, it makes sense the threshold starts at a relatively lower level of $250,000, so that as many people pay it as possible, said Robert McClelland, a senior fellow at the Urban-Brookings Tax Policy Center, a nonpartisan think tank in Washington, D.C. He said some questions to consider about the proposal are whether it would be indexed for inflation — so that it continues to impact only the wealthiest people — and whether married people’s income would be counted together or separately when calculating who meets the surtax threshold. If married people’s income is counted together, it could create a “marriage penalty,” he said, which might not be a good policy decision. Scott, for his part, has been a sharp critic of the tax surcharge idea and contends that it would drive businesses and wealthy individuals out of the state at a time when Vermont needs to be growing its population, not losing more residents. “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 earlier this year.  Vermont has a neighboring state, New Hampshire, with no income tax — which could draw some people across the border, McClelland suggested. But he said there is little evidence from elsewhere in the country that significant “tax flight” would occur.  In Massachusetts, the so-called “millionaire’s tax” has exceeded projections for how much revenue it would bring into the state each year it’s been in effect since 2023. Supporters there argue this would not be the case if wealthy residents were leaving in large numbers to avoid paying the new charge.  “The best evidence is, that’s not much of a concern. People tend not to do that,” McClelland said.  For some people, “if you threw an extra 8% on their income above $500,000, they’d say, that’s it. I’m done,” he added. “But one also can imagine there’s a lot of people who love Vermont — and they’re not going to move, no matter what.” Taxing second homes  At a campaign town hall in Newfane last week, Janoo got a rousing ovation and even some loud cheers for another tax proposal: raising taxes on some second homes.  Her campaign platform draws a distinction between types of housing that she thinks are good for a community — primary homes, affordable housing, homes owned by small landlords and “modest family camps” — and those that she has described repeatedly as “extractive” of the types of housing people who live in the state need. The latter includes “luxury second homes, commercial vacation rentals, vacant investment properties” and those owned by large corporations and private equity, her website states. She’s proposed imposing a higher tax rate on the latter types of housing, which would discourage wealthy investors from buying up properties and allow the revenue to be “reinvested to reduce property taxes for Vermont residents,” according to her site. Her platform doesn’t list a specific dollar amount that could be raised from those taxes. In a social media post in May, she cited a figure as high as $1 billion a year, though later told VTDigger and Vermont Public that “was a rough estimate of the potential long-term revenue” and not an amount that the state could immediately count on taking in. Janoo said in an interview that it was hard to give a solid estimate because so much work would need to be done first to determine which types of properties would be taxed in what way. VTDigger and Vermont Public reported that even counting the number of second homes in the state is complicated, much less deciding how to tax them. The idea is, at least, popular: in a recent Vermont Public poll, 57% of respondents said they thought that the state should impose a new yearly tax on second homes. Scott, at a press conference last week, wouldn’t directly say whether he’d support new taxes on certain types of second homes. He said he’s waiting for more analysis of the idea by the state Department of Taxes before making up his mind.  Still, the governor said, “I would prefer not to raise any taxes” at all. Taxing big tech Another one of Janoo’s proposals is to tax the revenue that large technology companies earn from digital advertisements. She says tech companies collect troves of data on Vermonters to target them with ads, but in her view the state gets little benefit in return. She called it another “extractive” process, as is corporate ownership of housing.  Revenue from the tax would be invested in community broadband projects, local journalism and other initiatives, Janoo said. She also hopes that taxes on big tech companies dissuade them from running targeted ads, in the first place.   “We don’t have billboards in our state. Why don’t we discourage digital advertisements? Nobody likes them, anyway,” Janoo said. Numerous other states have considered or enacted some form of tax on digital advertising, some of which are similar to Janoo’s proposal. In August, a Maryland court struck down a digital advertising tax in that state after finding it violated federal internet tax freedom law, though state officials have since appealed that decision.   One of the challenges for Janoo’s proposals might not be whether or not they will discourage business from operating in the state, but rather, the cost the state would have to take on to administer them, Amanda Gregg, an associate professor of economics at Middlebury College, said in an interview. “This happens in Vermont. What I see is that sometimes, our reach exceeds our grasp administratively,” she said. “We have a small state government.”  Broadly, Gregg said she thinks Scott is right to be concerned about the impacts of new taxes on the state’s demographics and businesses. But she also said that voters are eager for new ideas, like the ones Janoo is proposing.  Recent polling and campaign fundraising data suggests Janoo has built significant momentum around the state in recent months, especially compared to most other Democrats who have run against Scott in years past.   Even Scott acknowledged last week, at his press conference, that Janoo’s ideas were generating excitement. Janoo is “a different voice and I think that people just are looking for change,” he said. “And she’s very articulate.” He contended that the change voters should support is sending more of his Republican allies to the Statehouse, rather than replacing him with a Democratic governor.  But Janoo’s ideas are “popular for a reason,” Gregg said. “It feels like doing something — and it addresses a sense of unfairness.”  Olivia Gieger contributed reporting. Read the story on VTDigger here: Vermont governor’s race will test voters’ appetite for raising new taxes — or cutting them. ...read more read less