Following tense negotiations between the House and Senate on how to increase funding beyond the $125 million the state already invests in childcare, it was ultimately decided to impose a 0.44% payroll tax increase on Vermonters. The Vermont Chamber has been deeply concerned throughout the session that this legislation would increase the cost burden on businesses without clearly addressing workforce solutions. While the Governor’s budget included a record $50 million of new funding for this sector, the Legislature wanted to spend more. The measure would raise $80 million of the over $100 million required annually to nearly double spending on the industry. The tax is to be split between employer and employees, with employers paying three-quarters of this new tax. The bill contains no guaranteed solutions for the availability, affordability, and dependability of childcare. As pointed out by members of the House Ways and Means Committee, it is even likely to prompt childcare price increases for some families. Given that the bill would impose a tax increase, the Governor is expected to veto it.

In a concession to the Senate’s position on a childcare revenue source, the Chair of the House Ways and Means Committee insisted that the Senate remove the State And Local Tax (SALT) deduction limit workaround from the miscellaneous tax bill H.471. This measure would have saved Vermont businesses $20 million in federal taxes that were imposed during the Trump Administration and brought $1.7 million of new revenue to the State. Vermont is one of the last remaining “blue” states that has not created this workaround. While members of the committee seemed baffled by the decision to abandon this change which they had worked on through the session, they ultimately concurred with the bill changes and their Chair.  

The House Ways and Means Committee continued to take testimony on childcare legislation that would raise $100 million in taxes to almost double spending for the childcare industry without any assured fixes for the availability, affordability, and dependability of childcare for Vermonter’s workers. While the bill offers relief to the highest and lowest-income Vermonters, the Vermont Chamber remains concerned that the needs of middle-income Vermonters will not be met. The Commissioner of Taxes, Craig Bolio, testified that Vermonters currently pay 13.6% of their income in state and local taxes, which is higher than any other state except New York, Connecticut, and Hawaii. The Commissioner also noted that this year, Vermont taxpayers are expected to pay over $80 million in property tax increases, and the Legislature is considering over $285 million in additional taxes. The combined $365 million tax increase is more than two times the projected General Fund revenue drop from FY23 to FY24.  

A SALT deduction that would save Vermont companies $20 million in federal taxes was added to the bill. This is a measure supported by the Vermont Chamber, but it does not do enough to outweigh the full impacts that middle-income earners and small businesses will feel from these tax impacts. 

With nearly half a billion in increased costs already on the table, now is not the time for even further tax proposal increases. However, the House Ways and Means Committee continued conversations on a new childcare funding plan that would increase corporate and personal income taxes. Since last week, rate proposals have already increased. New numbers from JFO suggest progressive increases and another rate change in 2028. If passed, S.56 would establish Vermont as having the highest corporate tax in the nation, just one year after the legislature made comprehensive reforms to the corporate tax system, further contributing to an unpredictable business climate.  

The committee has yet to hear testimony from anyone outside of legislative employees on the impacts of raising the corporate and personal income tax. The Vermont Chamber is committed to advocating for policies that are rooted in the economic reality of Vermont, and while Vermont is a leader on major initiatives, we cannot afford to do so by placing an undue burden on the people of Vermont.