Small Business in Vermont Gets Ready For Tax Hike

June 29, 2018

By David Flemming

Vermont homeowners can breathe a temporary sigh of (relative) relief. A government shutdown has been avoided, and most homeowners’ property taxes will not increase until 2020. Vermont business owners were not so lucky, and will face a tax hike in 2019.

The Senate drafted it’s final proposal and maneuvered it through the House on Monday, June 22. It was then delivered to Governor Phil Scott, who will let it become law on Saturday, rather than sign it with his blessing. With the threat of a government shutdown on July 1, Scott decided that vetoing the budget would not have been in Vermonters’ best interest.

The bill gives Vermont teachers an increased health benefit, and creates a task force with the stated goal of decreasing staff-to-student ratios at public schools in an effort to alleviate future tax increases. Current taxes were another issue entirely.

In an email, Gov. Phil Scott stated, “I am frustrated, and disappointed for Vermonters, that Democrats in the House and Senate have forced through a non-residential tax rate increase in a year we have a growing surplus. But, I’m pleased to have achieved about 75 percent of the property tax rate relief I fought for this year, including a second consecutive year of level statewide rates for residential payers.”

The bill dedicates $20 million of surplus revenue toward ensuring that the residential tax rate on homes will not increase in 2019. However, the nonresidential property tax rate will increase by 4.5%. This means that Vermonters owning small businesses and second homes will see their taxes increase in 2019. If Vermont does not see another windfall of surplus revenue in 2019, even primary homes will see a tax increase in 2020.

The most worrisome of these immediate tax increases is on Vermont’s small businesses. Whereas wealthier Vermonters can more easily absorb tax hikes on their second homes, low-income and middle-income Vermonters owning small businesses will likely see lower disposable incomes and perhaps even shut down. Vermont has historically had some of the highest rates of small business ownership of any state, but those rates have been falling since the 1990’s. We may already be on the road to the haves-and-have-nots, in which the only businesses that can afford to operate in Vermont are large businesses like Wal-Mart. Such businesses can leverage their size to provide products to consumers more cheaply and efficiently than small businesses.

For decades, progressive intellectuals and their legislative lackeys have operated under the assumption that a business’ revenues are somehow suspended above taxes and expenses, meaning businesses can generally afford tax increases. I sincerely hope our legislators are not operating with this assumption, and if so, it would explain a lot of the anti-business bills passed in the past couple of years.

Most Vermonters I speak with would love to pay a little more to support small, local businesses as opposed to corporate conglomerates, but they may soon have little choice if their budgets continue to be squeezed by high taxes.

Simply put, our government made the tax situation worse this year when it passed the hike. In 2017, Vermont had the 3rd most oppressive business taxes in the country. After our 2018 tax hike, Vermont can compete with California and New Jersey for the ignominious title of “state with the highest taxes on enterprise.”

Vermont’s cozy hometown feel is a nice buffer to have against economic decline, but we cannot rely on it forever. Sooner or later, our lackadaisical spending and high taxes will catch up with us. It’s time for our legislators to wake up and see the writing on the wall: “Decrease Vermont’s tax burden. Or suffer the consequences.”

– David Flemming is a policy analyst at the Ethan Allen Institute

{ 2 comments… read them below or add one }

Robert June 30, 2018 at 1:33 am

Gov. Scott, you can call it $20 million of surplus revenue if you want. I call $20 million of overtaxation. I don’t call your hand in my pocket “revenue.” I call it theft.

Reply

JOhn McClaughry June 30, 2018 at 1:32 pm

Actually the nonresidential school property tax isn’t increasing by 4.5 %. It will increase from $1.535 to $1.580 per $100 FMV, an increase of 3%. Bur David’s main point about Vermont’s high tax rates on businesses is well taken.

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