House Ways & Means Committee Passes $125 Million in Tax Increases

House Ways & Means Committee Passes $125 Million in Tax Increases

Just over three months before the $100 million payroll tax is set to start, the House Ways and Means Committee has passed an additional $125 million in new tax increases. None of these tax increases are slated to go into Vermont’s education fund deficit, which means that the additional $230 million that is projected to be needed for the education fund will be accounted for in double-digit increases to property taxes, a possible new cloud tax, and additional options.

Tax increases passed by the House Ways and Means Committee include:

  • $15.3 million – Increase in the Global Intangible Low Tax Income (GILTI) and Foreign Derived Intangible Income (FDII) taxes to increase the amount of revenue from foreign corporations doing business in Vermont
  • $17.7 million – Increase in the top marginal tax rate of corporate income tax from 8.5% to 10%
  • $74.9 million – New personal income tax bracket of 11.75% starting at $500,000 of income
  • $17.5 million – Property transfer tax increase from 1.25% to 3.25% for transfer values greater than $600,000

Notably, these changes were voted out swiftly without the robust testimony and due diligence normally afforded for major policy changes, leading to speculation that this was strategic to gain approval amid the Friday deadline to pass these bills. The Vermont Chamber raised concerns about these new taxes and the lack of thoroughness in their review with both the committee and the Speaker of the House.

The vote count for the bills containing this breathtaking spending in the committee was split on party lines. If this is any indication of what is to come when these proposals hit the House floor, it will be up to the Senate to once again make choices that align with the fiscal reality of Vermont, and an already highly taxed population.

Legislators need to hear from you about your concerns. Please contact your Representatives before these proposals are considered by the full House next week and help them understand the collective impacts they will have on Vermont’s economy. 

Major, Innovative, Solutions Required to Address Ongoing Tax Concerns

Major, Innovative, Solutions Required to Address Ongoing Tax Concerns

In the wake of recent turmoil sparked by the anticipated 20% rise in property taxes, the urgent need for innovative cost-containment measures has become increasingly important. The Senate expedited the passage of a bill that allows school boards to delay budget votes and replace the 5% property tax increase cap with a discount system. However, top lawmakers have acknowledged that these measures are only temporary fixes and a broader solution is needed to address the issue comprehensively this session.

Despite statewide affordability concerns, discussions in the tax committees have continued on other potential tax increases including:

  • A tax on the personal income of a tax filer (single or filing jointly) earning over $500,000
  • A tax on unrealized personal gains
  • A tax on the gross sales of streaming services
  • A tax increase on the USF fees in telecommunication bills

Immediate Action Taken to Address Property Tax Increase, But New Tax Options Remain a Concern

Immediate Action Taken to Address Property Tax Increase, But New Tax Options Remain a Concern

There was movement this week on how to rapidly address the looming 20% property tax increases expected this year. A House Ways and Means Committee bill includes a repeal of the 5% cap set on tax rate increases, a measure that the Vermont Chamber and other business organizations asked legislators to take action on. This will take the burden off of non-residential taxpayers like renters and businesses to make up the difference between the 5% cap and full increase in spending. While short-term solutions to soften the projected $250 million statewide school spending hikes are the present focus of the taxing committees, the even greater concern is how they will address the long-term implications of an education fund that does not meet the needs of a school system with dwindling enrollment. Specifically, the next step outlined by legislators is considering new revenue sources for the education fund.

Taxes that have been discussed this session that may be on the table for this discussion include a “cloud tax” on software as a service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS). Whether as a response the the unsustainable increase in school spending or as a more general proposal, it is one possibility that is likely to gain traction in the House again this session. Nearly all Vermont businesses that use cloud-based services would see considerable cost increases. The Vermont Chamber will be working to minimize the impact, specifically on business-to-business transactions.

The following tax increases have also been under discussion this session:

  • A high-income earner surcharge of 3% aimed at tax filers, filing single or jointly, earning an annual income over $500,000
  • A new personal income tax on unrealized capital gains
  • Moving to a worldwide combined reporting corporate tax
  • Excise tax on sugary beverages
  • Increased taxation on candy (including maple)
  • Broadening Vermont’s sales tax.

 

While legislative proposals for increasing the burden on Vermonters are discussed, the Vermont Chamber is working to ensure cost containment measures, like finding efficiencies in the education system, are also considered.

Substantial New Taxes Pose Greater Risk to Affordability, Demographic Concerns

Substantial New Taxes Pose Greater Risk to Affordability, Demographic Concerns

House and Senate tax committees considered several new or expanded revenue sources to supplement a projected 20% increase in the average property tax bill for the next fiscal year. Addressing the persistent shortfall in the education fund, which struggles to meet the needs of a school system serving fewer students but requiring more resources, is not a new challenge. Introducing new revenue sources without accompanying solutions merely serves as a temporary fix. The Vermont Chamber agrees with the committee members willing to stand up and say that more money is not the solution and that hard conversations about cost containment measures need to happen this session. Specifically, those identified by the Joint Fiscal Office that would allow the education fund to support students without increasing the tax burden on Vermonters, which would only further drive the workforce from the state.

Options under discussion include an excise tax on sugary beverages, increased taxation on candy (including maple), a 6% sales tax on remotely accessed software, and potentially increasing Vermont’s sales tax. Last week, several business organizations sent a joint memo to the chairs of key committees to raise these concerns and request that they implement the changes provided by the Joint Fiscal Office to curtail education spending. Cost containment measures can’t take a back seat, while legislative proposals for increasing the burden on Vermonters are discussed.

Chair Kornheiser Unveils New Tax Package

Chair Kornheiser Unveils New Tax Package

House Ways and Means Committee Chair Rep. Emilie Kornheiser (D-Brattleboro) announced her new tax proposals shortly after the Governor’s budget address. These new taxes come into consideration as businesses and workers will soon feel the $100 million first-ever state payroll tax to be levied starting July 1. This tax proposal is also in tandem with statewide concern for double-digit property tax increases and the confusion around how school spending works.

New taxes that have been introduced include:

  • A wealth tax of 3% aimed at tax filers, filing single or jointly, earning over $500,000.
  • A new personal income tax on unrealized capital gains.
  • Moving to a worldwide combined reporting corporate tax.
  • A cloud tax containing tax on software as a service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS).

Raising these taxes will not reduce the tax burden on middle-income Vermonters. To make meaningful progress on improving affordability for middle-income Vermonters we can instead address the root causes of what is making the state unaffordable. The Vermont Chamber will continue to raise concerns about these tax proposals and share with businesses with the potential impact they would have on the Vermont economy in the weeks ahead.