Take the 5-Minute Economic Survey

To better understand Vermont business owners' perception of the state's fiscal economy, Davis & Hodgdon Associates CPAs and the Vermont Chamber are seeking your input in our annual survey related to the economy and local businesses.

Please take the annual 5-minute Vermont economic survey of small- to medium-sized businesses. The results of the survey will be compared to results from the previous surveys, published, and shared with all participants and local media in February 2020.

Tourism Day Mobilizes Industry

More than 150 people from the tourism sector attended the 2nd Annual Tourism Day at the State House to raise awareness of the industry’s important contribution to Vermont’s economy and to ask legislators for a $500,000 increase in destination marketing funds. Industry experts testified before the House Committee on Commerce and Economic Development with unified messaging that our economy depends on a healthy tourism industry, and that tourism and economic development often intersect in rural communities.

Rep. Heidi Scheuermann (R-Stowe) has introduced a bill seeking these funds to be appropriated to the Vermont Department of Tourism and Marketing. This bill is supported by the Tourism Caucus and would help bolster the Vermont Chamber’s tourism advocacy efforts.

Join the Vermont Chamber in urging the Legislature to increase VDTM’s promotional budget:

• Sign the petition to show your support of the increased investment
• Use the industry toolkit resources
• Contact your legislator(s)

For additional information about tourism funding, please contact Amy Spear.

Senate Reviews High Costs of Latest Minimum Wage Proposal

The Senate Economic Development Committee reviewed the latest minimum wage proposal which would raise the minimum wage to $12.40 or $12.55 over two years, and increase it by CPI or 5% (whichever is less) after that. If adjusted for compression, in 2022 the two paths would cost the state $3.8 million for the $12.40 proposal, or $4.1 million for the $12.55 proposal to properly fund Medicaid subsidized wages. To satisfy pay requirements without adjusting for compression, the state’s obligation would still be $1.5 million for the $12.40 proposal or $1.6 million for the $12.55 proposal in 2022. These numbers do not include additional costs the state would incur by raising other impacted state employee or contractor wages.

Similar impacts would be felt across the private sector. The Vermont Chamber has repeatedly testified on the negative impacts of additional minimum wage increases beyond those already in statute, including by highlighting that small businesses in rural areas will face outsized difficulties in adjusting to any new wage mandates. The bill now moves to conference, where meetings will begin next week.

Economic Development Programs Under Fire

In what developed into a heated exchange, the State Auditor (a critic of current workforce recruitment programs), and representatives from the Agency of Commerce and Community Development testified in the Senate on the remote worker program. During the testimony, the Senate Economic Development Committee leadership expressed support for state programs designed to recruit additional population to Vermont – a priority of the Vermont Chamber and one highlighted by the Vermont Futures Project.

Businesses around the state have expressed nearly unanimous concern about Vermont’s lack of workforce availability. The Vermont Chamber and the majority of state leaders agree that lack of workforce capacity is one of the greatest threats, current and future, to the state’s economic wellbeing.

First Up for Tax Committee: Business Tax Review

It’s always concerning to the Vermont Chamber when the first order of business for the House Ways & Means Committee is to review the impact of Federal tax cuts on state income tax revenues. While there was no specific direction stated, the Committee worked its way through a presentation on business classifications -- C-corps, S-corps, sole proprietors and partnerships – and how each one is taxed. Then they focused on the following:

1. Pass-through businesses (not C-corps) are an important source of income tax revenue for the State; $109 million annually or about 12% coming from over 70,000 tax returns.
2. Between 2009 and 2017, sole proprietor income stagnated while S-corporation/partnership income rose significantly; however, collectively the number of pass-through returns was flat.
3. The 20% business deduction created by the 2017 Tax Cuts and Jobs Act, may create future uncertainties for Vermont’s personal and corporate income taxes

If businesses begin switching business classification to take advantage of the federal tax cuts, that could have a negative impact on State income tax revenues. We are interested in your experience with the Federal tax cuts. Email Betsy Bishop with your story.

House Contemplates Act 250 Changes

In an unusual partnership, the Scott Administration and the Vermont Natural Resources Council (VNRC) presented the House Natural Resources Committee with a mutually supported plan to update the State’s principal land use law. Included in the testimony was a proposal to replace District Commissions (bodies that generally review larger Act 250 projects) with three-member professional boards.  Doing so would greatly increase consistency in the permitting process.  Over the last several years, businesses have expressed frustration with the often inconsistent and unpredictable paths of the existing permit process. The recommendations also included Act 250 permit exemptions for projects within municipalities holding downtown designations. These exemptions would better allow for economic growth, while also limiting the negative environmental impacts of sprawl.

In 2019, little progress was made on Act 250 reform, despite it being a priority of legislative leadership. The Vermont Chamber testified on Act 250 during the 2019 session, conveying the business community’s concerns. While the review process is far from over and the potential detrimental inclusions remains, we are supportive of the recommendations put forth by the Scott Administration and VNRC.

Engaging the Mature Workforce

The Vermont Chamber has been focused on increasing the workforce since 2016 when it was clear that the declining workforce participation rate was harming businesses. We have made progress addressing this issue by securing ongoing funds for marketing to talent outside of Vermont, offering incentives for new and current Vermonters, and providing training to workers. Yet, we still have much to do. The House Human Services Committee has been working on a bill to address the needs of older Vermonters. While much of the focus is on how to provide services to Vermonters as they age, the Vermont Chamber has urged policymakers to consider mature workers an asset to our economy. A working group has issued a report that includes a recommendation (supported by the Vermont Chamber) to encourage the State to “promote, encourage and support educating employers to implement methodologies that better enable the successful recruitment, integration and retention of older Vermonters into modern workplaces.”

House Reviews Software as a Service Tax Criteria

Legislative Counsel briefed House legislators on current sales tax criteria as it applies to the purchase of software as a service. Prewritten software purchased on storage media or downloaded to a computer in is currently taxable, while prewritten software accessed remotely via the internet is not. Late in the 2019 session, the Vermont Chamber worked to prevent the imposition of a tax on software as a service, often referred to as a “cloud tax,” which would have cost Vermont’s tech industry $ 6.1 million.

With eighteen states implementing similar taxes in the aftermath of the South Dakota v. Wayfair Supreme Court decision, the possibility of enacting a cloud tax has increased considerably, especially with members of the House Ways & Means Committee again expressing support for such a tax this week. Imposition of an additional tax on software as a service would threaten growth in Vermont’s tech sector, an industry that elected leaders continually use as an example of a preferred growth sector given its high wages and low environmental footprint. If you have questions or concerns about a cloud tax, please contact Charles Martin.

Transportation and Climate Initiative Reviewed in Senate

The Senate Transportation Committee reviewed the Transportation and Climate Initiative (TCI), a regional program of Northeast and Mid-Atlantic states to establish a regional cap-and-invest program to reduce carbon emissions from the transportation sector by placing a cap on emissions from fossil fuel companies and use the revenue raised to help the states invest in cleaner transportation options. The program could mean an incremental increase in the price of gasoline from $0.05 to $0.17 per gallon for Vermonters. As currently written, the TCI program is problematic for several reasons; it will add costs for fuel dealers and distributors to reduce their sales for, for example, home heating fuel; capturing, managing and regulating the price allowances or fees for enterers from Québec and New Hampshire will be challenging, and the auction that determines the price of fuel will place small Vermont businesses at a competitive disadvantage. While the regional approach is better than a new tax at the state level, a national approach to update our transportation system and help address climate change is still preferred. Final judgement on TCI is reserved until the final draft of the TCI program is released in the April timeframe.

Bill Would Lower Legal BAC Level By .03

A bill recently introduced in the Senate would reduce the state’s blood alcohol concentration limit from 0.08 percent to 0.05 percent. The bill comes at a time when the State continues to debate which mechanism to use for properly assessing marijuana-related inebriation. Lowering the BAC threshold to .05 would make Vermont’s legal limit the most restrictive threshold in the United States.

Latest Paid Leave Proposal Faces Difficulties in Conference

Consensus was lacking during the latest conference committee meeting designed to resolve differences between House and Senate paid family leave proposals. Leaders from the Senate expressed initial frustration, but reluctantly submitted to House conferee recommendations to lower the wage eligibility criteria that determines who benefits from the proposed program. In putting forth the recommendation, House members seek to bring additional seasonal and part-time workers into the program’s coverage. Members of the House’s Progressive Caucus have threatened to derail the bill if it is not considerably expanded in scope. These conversations and others indicate that summer promises of consensus on the paid leave effort may have been overly optimistic.

The latest version of the bill, which will cost $29.7 million (borne by employees), now faces an uncertain path as it advances to the House and Senate for votes.

Vermont Chamber Testifies to Protect Valuable Employer Protection

The Vermont Chamber worked with legislators to improve a bill last session that would have entirely prohibited the use of non-compete agreements in employment contracts. These agreements aid in the protection of propriety confidential information, intellectual property, and customer relationships. The House Commerce and Economic Development Committee heard renewed testimony this week from the Vermont Chamber, attorneys, and other business representatives on the value of non-competes. Groups also offered recommendations for appropriate changes to address some of the issues raised by labor advocates. Witnesses explained that, for the most part, current law sufficiently addresses many of the concerns about non-competes. The Vermont Chamber specifically highlighted that these agreements safeguard Vermont companies, particularly small businesses that often face fierce business and workforce recruitment competition from larger national and international companies.

The Vermont Chamber recognizes the vital importance of ensuring that businesses possess the tools to protect sensitive information. We will continue to oppose any bill that seeks to impose a blanket prohibition on the use of non-compete agreements.

In Case You Missed It

Economy: New Alliance Forms to Support Destination Marketing Funding

Pensions: Vermont Business Roundtable Takes On Troubled Pension System

Business: Darn Tough CEO Calls BS on Vermont Being a Hard Place to Do Business

Business: Lawmakers Seek to Limit Non-Compete Clauses

Legislature: Chef-Legislator Birong Balances Customers and Constituents

Politics: Ram, Giambatista Announce Chittenden County Senate Bids

Politics: Zuckerman Officially Announces Run for Governor

Politics: Sen. Debbie Ingram Enters Race for Lieutenant Governor

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Governor’s State of the State Highlights Population Crisis as State’s Greatest Challenge

In the Governor’s State of the State speech, he called for increased collaboration and cohesion among political leaders. During an overview of his more specific policy agenda, the Governor told a packed House Chamber his most urgent concern is Vermont’s demographic crisis. He went on to explain his interest in lowering property taxes, working with legislative leaders on Act 250 reform, continuing investment in workforce development programs, and building additional workforce housing.

The Vermont Chamber was a key supporter of the remote worker program, which the Governor also highlighted as a successful program in addressing many of his concerns, like population and workforce recruitment. The Vermont Chamber continues to support investment in programs to recruit people to live and work in Vermont, including advocating for additional state funds to market tourism – an essential industry for the Vermont economy and one proven to also recruit new Vermonters.

Revised Leave Bill Will Cost Workers $29 Million

Legislative Council and the Joint Fiscal Office briefed the House General and Military Affairs Committee on the latest paid family leave proposal. The Senate’s new bill would provide additional parental leave benefits, but removes default medical leave for personal injury. Employees would be permitted to pay an additional payroll contribution to fund personal injury insurance as an expanded benefit. Under the proposed paid leave program, 60,000 employees-- predominately part-time and seasonal workers-- are subject to the payroll tax without being eligible for enrollment in the insurance program.

The latest bill does not include a mandatory employer contribution to fund the proposed leave program, a feature of the current version for which the Vermont Chamber successfully advocated last session. The latest bill, which will cost $29.7 million, will now move to a conference committee of Senators and House members tasked with resolving any differences the two bodies have regarding final details.

Study Details Causes of Taxpayer Out-Migration

The House Ways and Means Committee reviewed a recently completed taxpayer migration study, which demonstrated that Vermont has experienced a net out-migration predominately comprised of middle- and lower-income taxpayers. Most out-migrants have left Vermont for New Hampshire, where the tax burden per resident is significantly lower. Yet, Vermont has gained more high-income taxpayers with a net of 126 taxpayers with incomes above $200,000, which is better than 31 states.

Minimum Wage Proposal Would Cost State (and Businesses) Millions

The latest minimum wage proposal would raise the minimum wage to $12.40 or $12.55 over two years and increase by CPI or 5% (whichever is less) after that. If adjusted for compression, in 2022, the paths would cost the state $3.8 million for the $12.40 proposal, or $4.1 million for the $12.55 proposal, to properly fund Medicaid subsidized wages. To satisfy pay requirements without adjusting for compression, the state’s obligation would still be $1.5 million for the $12.40 proposal or $1.6 million for the $12.55 proposal in 2022. These numbers do not include the additional costs that would incur by raising other impacted state employee or contractor wages.

Similar impacts would be felt across other sectors in Vermont. The Vermont Chamber has repeatedly testified on the negative impacts of additional minimum wage increases, beyond those already in statute, particularly highlighting that small businesses in rural areas will face outsized difficulties in adjusting to any new wage mandates.

Solutions for Lower Health Care Premiums

The Senate Finance Committee reviewed changes to health care laws that could offer relief from rising premiums for small businesses. One report suggests that separating the small business group from the individual market could result in a 6% reduction in premiums for small businesses; however, this is not recommended because it could mean increases for individuals who purchase their own insurance without help from an employer.

Another option is to partially unmerge these two groups. It allows for different insurance products with no change in premiums. It does allow greater flexibility for the state to adjust if small businesses continue to leave this group. In 2019, that decline was 10% and likely due to the double-digit rate increase slated for 2020.

The Committee also reviewed a captive insurance option formed by BCBSVT, which self-funded with stop-loss protection. There is no capital requirement to join and businesses share savings. These plans tend to have lower rates because the premiums reflect the actual cost of employees’ health care without sharing with other businesses.

There continues to be concern from legislators and the health care advocate that any offerings that allow businesses to purchase insurance outside of the exchange will create higher premiums for individuals in that pool.

Policy makers understand that rate increases are difficult for businesses to manage but they are unlikely to shift that cost back onto individuals where it was prior to the 2014 reforms.

Senate Judiciary Recommends Override of Governor’s Veto on Chemical Regulation Bill

U.S. District Court Judge Geoffrey Crawford recently ruled that medical monitoring for industry chemicals is allowed as a legal remedy without a physical injury. Following this decision, the Senate Judiciary Committee reviewed how this ruling impacts S.37, the bill vetoed by the Governor last year that seeks to create a new private right of action for medical monitoring damages without a present injury or disease and based on any level of exposure. With this new court ruling, the Committee discussed three options:

• Leave S.37 as currently written;
• Adopt Judge Crawford’s six criteria and framework for claimants to seek a remedy; or
• Override the Governor’s veto.

The Committee voted 3-2 to keep S.37 as is and proceed with an attempt to override the veto. There was general recognition that if the override attempt failed, the Committee would revisit the issue.

The Vermont Chamber has worked to strike a balance between protecting Vermonters and our environment, and disrupting insurance markets, which would put manufacturers at significant risks and costs.

Investing in Vermont Tourism

Efforts to advocate for a $500,000 increase for Vermont’s destination marketing funds continue. To secure this funding, the Vermont Chamber’s lobbying team met individually with 30 legislators prior to the session, as well as key administration officials from the Governor’s office, the Agency of Commerce and Community Development, and the Vermont Department of Tourism Marketing.

With the return of legislators to Montpelier, the Vermont Chamber looks forward to an impactful Tourism Day at the State House on Wednesday, January 15. Members of the tourism industry will gather at the State House to raise awareness of the tourism industry to legislators and support increased destination marketing funding. Eight industry leaders will be testifying before the House Committee on Commerce and Economic Development to tell their Vermont story and why it is paramount that the State invests in tourism. The day begins with Governor Scott’s Coffee Hour in room 11 at 8:00 am.

Join the Vermont Chamber in urging the Legislature to increase VDTM’s promotional budget:

• Sign the petition to show your support of the increased investment
• Attend Tourism Day at the State House on January 15, 2020
• Use the industry toolkit resources and contact your legislator(s) to discuss the importance of destination marketing.

For additional information about tourism funding, please contact Amy Spear (aspear@vtchamber.com)

Legislators Propose Adding a $2 Per Night Occupancy Tax

Rep. David Yacovone (D-Morristown) will be introducing a bill to add a $2 per room night occupancy tax. The revenue generated from this new tax would fund affordable housing efforts and tourism promotion. In the past, this proposal did not include tourism promotion, so we see that as progress. However, we remain concerned about adding this additional burden onto the lodging industry where competition for visitor spending is fierce. Instead, we are proposing a $500,000 increase in tourism funding rather than a tax or fee that would increase the burden on the tourism industry and further erode Vermont’s market share.

Global Warming Solutions Act Reviewed in the House

An updated version of the Global Warming Solutions Act (GWSA) of 2020 was briefed in the House Energy Committee. The new bill mandates a reduction of not less than 26 percent from 2005 greenhouse gas emissions by January 1, 2025 and a reduction of not less than 40 percent from 1990 greenhouse gas emissions by January 1, 2030. The bill also establishes a Climate Council comprised of 21 individuals appointed by the legislature and the administration and chaired by the Secretary of the Agency of Natural Resources who are collectively tasked with ensuring regulatory frameworks are created to meet the above goals. Encouragingly, GWSA mandates the creation of a subcommittee tasked with ensuring rural communities are not disproportionately burdened by any new regulations.

GWSA 2020 would also provide cause of [legal] action for private citizens or organizations outside of Vermont to sue the state if the above environmental standards are not met. While the Vermont Chamber supports seeking solutions to meaningfully address the realities of climate change, we remain concerned about the creation of new mandates that may be unsustainable for many sectors, or add significantly to the cost of living in Vermont.

Bill Provides Employers Increased Capacity to Pay Down Employee Student Debt

Members of House’s tax committee heard testimony on H290. If passed, the bill would provide a deduction for taxable income for the first $5,000 in employee student loan payments made by an employer on behalf of their employee. Student loan debt is a significant financial burden for Vermont’s workforce, and the Vermont Chamber is supportive of offering employers greater capacity to provide student debt relief to their employees.

In Case You Missed It

Pollina Proposes Vt. Green New Deal

Vermont Legislative Leaders Look Ahead At Issues They Want To Tackle In 2020

Lawmakers Seek to Limit Non-Compete Clauses

Zuckerman to Announce Run for Governor

Ashe to Run for Lt. Governor

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