Legislature Levies an $80 Million Payroll Tax on Vermont Businesses and Employees

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.