by the Vermont Chamber of Commerce

Republished from last week’s Montpelier Minute newsletter

After months of work by the House Ways and Means Committee, the Tax Department, and the Vermont Chamber, H.933 is designed to expand opportunity for Vermont’s small businesses. The bill aligns Vermont with federal tax policy, strengthens tools like the R&D credit, and improves predictability for businesses looking to invest and grow.

A late-stage proposal, the Priestley Cole amendment, introduced a tax structure with significant implications for employers before being withdrawn ahead of a vote. The amendment would establish a new minimum tax tied to federal adjusted gross income and increase top marginal tax rates. For many Vermont businesses, particularly pass-through entities, this would increase tax liability regardless of actual profitability and add complexity to long-term planning.

What it means for business:

Many small businesses in Vermont are structured as pass-through entities, meaning business income is reported on the owner’s personal tax return. In practice, that income often represents revenue used to cover payroll, inventory, equipment, and operating costs. By tying a minimum tax to adjusted gross income, the amendment creates a disconnect between tax burden and a business’s actual financial position.

Under the withdrawn proposal, taxpayers with federal adjusted gross income above $150,000 would pay the greater of their standard tax liability or 3% of that income. For businesses with narrow margins or fluctuating revenue, this establishes a floor on tax liability that may not reflect profitability.

The amendment also proposes increasing Vermont’s top marginal income tax rates to 11.75% on income between $500,000 and $1,000,000 and 13.75% on income over $1,000,000. Because these rates apply to pass-through income, they directly affect business owners and may influence decisions related to hiring, reinvestment, and expansion.

These changes come at a time when Vermont continues to face challenges with economic momentum, workforce availability, and affordability. Tax policy plays a direct role in shaping business confidence and the state’s ability to attract and retain employers and talent.

Vermont has already made a clear policy choice to maintain a progressive tax system. The question is how to balance that structure with policies that support economic growth and affordability. While the amendment includes adjustments at lower income levels, its primary mechanism is a combination of higher rates and a new minimum tax structure.

H.933 was developed to support growth, improve predictability, and better position Vermont businesses to compete. The Priestley Cole amendment introduces additional tax exposure and complexity that could limit reinvestment, slow growth, and reduce predictability for Vermont employers.

Although the amendment has been withdrawn and is expected to be taken up in Ways and Means, its implications remain important for Vermont’s business community.