Taxes

New data from the Vermont Department of Labor was presented to the Senate Economic Development, Housing, and General Affairs committee this week. The data underscores the urgency of addressing Vermont’s workforce challenges with a coordinated, long-term plan. While Vermont’s unemployment rate remains low, job growth in 2024 slowed dramatically to just 400 new positions statewide, leaving the state nearly 5,000 jobs below pre-pandemic levels.

This stagnation contrasts with national trends. Many states have rebounded past 2019 levels, buoyed by faster population growth and stronger economic momentum. Vermont’s modest gains came almost entirely from the Burlington metro area, where jobs grew by 900. Outside that region, employment is contracting, highlighting growing regional disparities and varied infrastructure and spending capabilities.

Many sectors continue to struggle. Manufacturing lost 800 jobs last year, and administrative support, wholesale trade, and hospitality all experienced declines. Manufacturing employment has now dropped two years in a row, raising red flags for a sector critical to Vermont’s economic diversity.

Complicating the picture is Vermont’s labor force composition. According to the latest Household Pulse Survey, 55.2% of Vermonters not working cited retirement as their main reason, compared to just 46.3% nationally. Vermont also reports more individuals caring for elderly family members, further reflecting the state’s aging demographic profile. While participation rates are rising modestly, the pool of working-age Vermonters is not growing fast enough to meet economic demand.

The data reinforces a clear trend: Vermont’s working-age population is shrinking faster than the national average. Our state cannot afford to approach workforce issues piecemeal. Policymakers must act on what the data clearly show: Vermont’s labor market is under strain from demographic pressures, uneven growth, and emerging economic volatility.

Long-term trends are not the only concern. The 2023-2024 data does not yet account for new economic stressors, including rising tariffs, global supply chain disruptions, and inflationary pressures, all of which are creating new challenges for employers in 2025.

The Vermont Chamber continues to call focus to the cohesive, statewide Economic Action Plan, produced by the Vermont Futures Project, that addresses these realities head-on. As Vermont’s economy continues to struggle, both efficiency and expansion strategies are required to address the need for growth in Vermont’s workforce. While the fragmented measures being taken by the Legislature may aspire to these goals, added scope, scale, and data-informed solutions are necessary to solve the root causes of Vermont’s workforce challenges. This includes investing in workforce retention and recruitment, expanding housing, and aligning education and training systems with Vermont’s current and future economic needs.

These aren’t new conversations, but the data makes them more urgent than ever. Now is the time for a strategy that prepares Vermont not just to recover, but to compete.

The Vermont Legislature continues to advance two key pieces of education finance legislation: H.454, a comprehensive education finance reform bill, and H.491, the annual yield bill that sets property tax rates.

The Vermont Chamber provided testimony to the Senate Finance Committee on H.454, emphasizing that reforms must enhance Vermont’s economic competitiveness and avoid increasing cost pressures on employers. While the Vermont Chamber supports the goal of equitable education funding, concerns remain that proposed changes could increase tax complexity, reduce predictability, and add to the financial burden on job creators already navigating workforce shortages and inflation.

One significant area of concern in H.454 is the proposed shift from two to four property tax classifications: Homestead, Nonresidential, Residential, and Apartment. The Vermont Chamber has strongly urged lawmakers to maintain a unified Nonhomestead category, citing the risk of disproportionate tax hikes on commercial properties and added administrative burdens. With Vermont already ranked highest in the nation for per capita property tax burden, the proposed classification changes could have long-term consequences for business investment and affordability.

In Senate Education, the Agency of Education presented details on an “Enhanced Evidence-Based Model” for implementing the foundation formula, with a proposed FY25 funding level of $1.77 billion approximately 6% lower than current levels. The model would reallocate funds to categorical aid and implement a multi-year transition period (FY27–FY31), including phased increases for gaining districts and gradual reductions for those seeing decreases. However, modeling for these changes has not yet been shared with the Joint Fiscal Office, limiting the Legislature’s ability to fully evaluate fiscal impacts.

Meanwhile, the Senate Finance Committee also weighed decisions on H.491, the yield bill. The bill proposes using $77 million in General Fund revenue and $42 million in Education Fund debt to reduce the projected property tax increase. Lawmakers debated whether to apply the full buy-down to provide immediate taxpayer relief or reserve a portion to offset future rate hikes. With some districts seeing up to 20% increases in recent years, many supported full use of available funds this year. The Senate Finance Committee ultimately advanced the House-passed version of the bill, which includes the full $77 million buy-down in a vote of 6-1-0.

As these critical conversations continue, the Vermont Chamber remains engaged to ensure that education finance reform achieves long-term stability and equity without compromising affordability or economic growth.

The Vermont House of Representatives passed H.454 (87-55) a sweeping education reform bill aimed at addressing education finance and delivery. While the bill passed, it contains many controversial provisions that will require further debate in the Senate. Notably, significant property tax classification changes are likely to affect the business community. The move could expose businesses to higher rates with recent actions casting doubt on promises to protect businesses. As passed by the House, the proposal expands property classifications from two to four:

• Homestead
• Nonhomestead, Apartment
• Nonhomestead, Nonresidential
• Nonhomestead, Residential

Although other sections of the bill were updated through a bipartisan amendment, many members still found them inadequate, and proposals to support Vermont’s business community were entirely omitted from the compromise. At a time when employers face workforce shortages, inflation, and national regulatory changes, the lack of meaningful state-level support is increasingly unsustainable.

The Vermont Chamber remains concerned and opposes the expansion of property tax classifications; more specifically, the creation of a category singling out businesses creating an opening for inequitable tax treatment, increasing the risk of higher tax rates in future years.

While some legislators insist that there is no intention to raise taxes on businesses, recent actions have undermined that promise. For instance, last year, the House passed $125 million in new taxes on businesses and working Vermonters, as well as a larger increase in the Nonhomestead property tax rate in comparison to the Homestead rate.

The Vermont Chamber advocated for the combination of the Nonhomestead, Apartment and Nonhomestead, Nonresidential categories into one unified Nonhomestead category. This consolidation would recognize that both property types share similar market-driven and investment characteristics, setting them apart from Nonhomestead, Residential properties. This consolidation would simplify the system, promote equity, and better protect Vermont’s overburdened business community.

Following a floor debate, a roll call vote was taken so that constituents could see their legislators’ positions on this critical issue. As the bill advances to the Senate, there is hope that a more balanced approach will be adopted to address education governance and finance reform, tackle cost containment, and prevent businesses from being singled out to bear an increasing share of the state’s tax burden.