During a time of great uncertainty, we need to value the economy. Given the economic conditions already facing the Vermont business community, an outpouring of new taxes would threaten the economic sustainability of our communities. A month into the session, the following taxes are all being discussed by the legislature: 

• A payroll tax for childcare 
• A payroll tax for healthcare 
• A payroll tax for paid family and medical leave 
• A cloud tax 
• Changing the property tax for education funding to an income-based tax
• A fee bill 

 We can’t talk about issues like the housing or childcare shortages without talking about the economic conditions that caused and are exacerbating these issues. Understanding regulatory barriers, the workforce crisis, our demographic challenges, and costs that add pressures on businesses must be part of a balanced policy conversation.

Discussion in recent years on how to address aggregating retail theft has been met with resistance due to police department staffing issues, court backlogs caused by the pandemic, and an unwillingness to prioritize nonviolent property crimes.  

However, on the federal level, the INFORM (Integrity, Notification, and Fairness in Online Retail Marketplaces) for Consumers Act, was passed as part of the omnibus appropriations bill in December. The legislation is intended to reduce demand for stolen merchandise and combat organized retail theft. It requires online marketplaces to verify the identities of high-volume third-party sellers by authenticating the seller’s government ID, tax ID, bank account, and contact information.  

The House Ways and Means Committee reviewed a report on recommendations for the creation and implementation of an income-based education tax to replace the homestead property tax. While businesses are facing several significant tax proposals this session, the total impact of new taxes must be considered so the Vermont economy is not overwhelmed. 

The committee that created the report did not weigh the decision of whether it should be adopted and instead opted to outline how the tax should be structured when adopted and did not recommend a specific rate. The executive summary states: “Given the scope of its legislative charge and limited timeframe to accomplish that charge, the Committee decided not to prioritize the policy question of whether an education income tax should be adopted. The Committee decided instead to concentrate on if an education income tax were to be adopted, how should it be structured.” 

Notable recommendations were that homesteads, and two surrounding acres, would be exempt from property tax, but any additional acreage on a homestead parcel would be taxed at the non-homestead rate. Funding would remain tied to the local community’s spending decisions, but rather than being based on property value, it would be based on income. The report recommends that second homeowners would not be taxed on the value of their property, but rather on their earned income in Vermont. However, questions remain on how concerns of out-of-state property owners who do not earn a Vermont income would be addressed. 

Following the announcement of the Governor’s paid family and medical leave plan in December, an alternative bill has formally been introduced in the legislature. The most notable difference is the funding structure, with the Governor’s proposal using existing revenue while the House proposal relies on a 0.58% payroll tax on businesses and employees.  

The legislative proposal, H.66, is framed as a social infrastructure investment to strengthen families and the economy. However, with 20,000 open jobs in Vermont, further examination is required to understand the combined impact of workforce reductions and a payroll tax on the economy. As expected, the bill includes 12 weeks of complete wage replacement for all workers, including seasonal and part-time workers, as well as self-employed individuals that opt-in. The payroll tax would be split between employee and employer to fund the proposed plan, with an exception for workers who make less than $20,000 a year, who would be exempt from paying into the system. With an expansive definition of family to include personal bonds, Vermonters would be eligible in a broad variety of instances. The Governor’s alternative plan announced in December would be administered by a private insurer with a cost of $2 million annually to cover state employees and offer 60% wage replacement for up to six weeks.   

The Budget Adjustment Act will be finalized next week following recommendations made to the House Appropriations Committee. For the most part, the proposals advocated for by the Vermont Chamber are being recommended as requested. The Rural Infrastructure Assistance Program has gained wide support, but how funds would be allocated and to whom, remains in consideration.  

The current proposal on an underserved index has not been received well but several legislators have expressed commitment to finding a path forward. The VEDA Forgivable Loan Program is still running and continues to accept applications from businesses recovering from the impacts of COVID-19. However, VEDA has announced an end date of accepting applications in March. A recommendation has been put forward by the House Commerce and Economic Development Committee to end the program at the close of FY 2023, giving VEDA the opportunity to close out applications and the legislature the opportunity to thoughtfully consider where any remaining business recovery funds are spent.  

The Vermont Chamber testified in support of several economic growth initiatives detailed in the Governor’s FY23 recommended Budget Adjustment, including investments in services to recruit and retain the New American workforce, and essential rural infrastructure.   

Workforce Recruitment and Retention 
With over 20,000 job openings and not enough Vermonters available to fill them, we need more people. New Americans have always been an important part of Vermont’s culture and workforce and continue to be a critical part of Vermont’s economic vibrancy. Barriers exist for New Americans seeking employment and we support the Governor’s request to fund services to address this to ensure these Vermonters can access opportunities.  

Housing 
Recent graduates and seasoned professionals alike are deterred from working in Vermont due to the statewide supply shortage of suitable housing. In 2016 the Vermont Futures Project determined that the state needed to build 5,000 units of housing a year to meet demand. That figure has now grown to 6,000 per year according to the Vermont Housing Finance Agency. The Vermont Housing Investment Program has provided important investment opportunities to increase the rental housing units available across Vermont and we support the Governor’s request for additional funding for this program.  

Rural Capacity 
The federal funds that flowed to Vermont for COVID-19 recovery provided a once-in-a-lifetime opportunity to invest in Vermont’s communities and infrastructure. For underserved communities, these funds have remained out of reach due to a lack of staff capacity to find, apply, and administer funds.  With a quickly approaching expiration date to obligate and use these funds and there is an urgency to help underserved communities with these existing programs. We request that you support Governor’s request for $3 million in the rural infrastructure program to provide technical assistance for those in underserved communities to have access to the transformative programs this body created during the last biennium.  

Broadband Buildout 
There are areas of Vermont that are unserved by high-speed internet because they either cannot connect to the internet altogether or are served by DSL. Particularly in rural towns, small businesses struggle to keep pace without reliable internet and spotty connections with their customer base, and communities stagnate or shrink because they struggle to attract new residents to a place without reliable internet connection for work and school. The Vermont Chamber of Commerce supported the State’s application for these competitive funds from NTIA and now supports the Governor’s request for $30 million to leverage these funds through the Budget Adjustment.