Beginning July 1, same-sex couples in Vermont can establish “civil unions” affording them most of the rights and privileges that married couples enjoy in the Green Mountain State. But civil union is not the same as marriage, as these couples will discover when they file their income tax returns.
The precedent-setting legislation signed by Gov. Howard Dean on April 26 came in response to a Vermont Supreme Court decision that forced the state’s lawmakers to act. In Baker v. State of Vermont, Vermont’s highest court found that three same-sex couples who sued for the right to marry were entitled by the state’s Constitution to “obtain the same benefits and protections afforded by Vermont law to married opposite-sex couples.”
The Court did not, however, require state lawmakers to allow same-sex marriage. “We do not purport to infringe upon the prerogatives of the Legislature to craft an appropriate means of addressing this constitutional mandate, other than to note that the record here refers to a number of potentially constitutional statutory schemes from other jurisdictions,” the Court said in last December’s decision. “These include what are typically referred to as ‘domestic partnership’ or ‘registered partnership’ acts, which generally establish an alternative legal status to marriage for same-sex couples, impose similar formal requirements and limitations, create a parallel licensing or registration scheme, and extend all or most of the same rights and obligations provided by the law to married partners.”
In what was already an emotionally charged issue, the Legislature decided to avoid formally establishing same-sex marriages, while making civil unions a near-equivalent
Though the statute specifies that tax laws other than estate taxes “shall apply in like manner” to couples in marriages and in civil unions, that is easier said than done.
Vermont’s income tax is computed as a flat percentage of the federal income tax, with a few modifications. Married couples, of course, can file their federal tax returns jointly. But there will be no joint federal returns for couples in Vermont civil unions. First of all, they are not married, and even if they are considered married, the federal Defense of Marriage Act that President Clinton signed in 1996 bars federal recognition of same-sex marriages. The state does not have the power to give same-sex couples equal treatment with married partners for federal tax purposes.
Since the Vermont tax is derived from the federal tax, how does a couple in a civil union enjoy the privilege of filing jointly when this is not allowed on the federal return? According to the Vermont Department of Taxes, couples in civil unions who wish to file jointly will have to recompute their federal returns as if they were married filing jointly for federal purposes. They will then use this recomputed return as the basis for their Vermont tax calculation. The procedure is cumbersome, but it seems to be the most logical way to reconcile the differences between federal and state law.
This procedure will not apply to the 2000 tax returns that Vermonters will file next spring. Although civil unions will be recognized this year, Vermont income tax rules will not reflect the change until next January 1. So, for 2000, partners in civil unions will continue to file as though they were single.
What about civil union couples who have income in states outside Vermont? If they were married, they could file joint returns in those states and obtain a Vermont tax credit to avoid being taxed twice on the out-of-state income. But 33 states have already passed legislation barring recognition of out-of-state same-sex marriages. It is not clear that even the states without such laws will consider Vermont civil unions to be the equal of marriage. If Vermont couples are considered single in other states but married for Vermont tax purposes, computing the credit for other states’ taxes is likely to become pretty complicated.
Estate taxes are another tricky matter. Married couples generally do not trigger federal estate taxes when they bequeath property to one another. Single people do. Vermont, like many states, collects its tax whenever federal estate taxes are triggered by “soaking up” the credit for state taxes that is allowed against the federal estate tax. Vermont law makers reason that since the state’s death tax actually does not add to the total tax burden, but only shifts dollars from Washington to Montpelier, there is no point in deferring the state tax at the death of the first partner in a civil union. Uncle Sam would simply collect the difference.
Vermont’s civil union is a significant step in what I believe is an inevitable process of adapting our laws to the realities of modern life. The state Constitution on which the Vermont Supreme Court based its ruling was adopted in 1777, when Vermont declared itself an independent republic. Although the framers of that Constitution surely never considered same-sex marriage, they did have the foresight to abolish slavery and the requirement that one must own property in order to vote.
Our country’s commitment to fair treatment and equal opportunity, though often breached in practice, goes back a long way, and keeps pushing us forward.
