More than $461 million in new taxes and fees under consideration

by Rob Roper

If you just paid your Vermont state taxes and thought wow that was brutal, you’re not wrong. According to the Tax Foundation, in 2022 Vermont already had the 4^th highest state and local tax burden in the country at 13.6 percent. But, oh, wait till next year!  

After winning veto-proof majorities in both chambers of the legislature this past November in an election largely focused on abortion rights, Vermont Democrats are now claiming mandates on just about every issue that ever sparked a glimmer in their eye from climate change, to childcare, to paid leave — you name it. This legislative session looks like a version of that old game show stunt where a contestant’s prize is to keep all the stuff they can pile into a shopping cart in ninety seconds. Only in this case Vermont taxpayers will be picking up the tab for all that loot.

The Vermont Chamber of Commerce calculated that our lawmakers are currently advancing $461 million in new, identifiable taxes and fees. This number does not include the as-of-yet unidentified costs of the Clean Heat Standard bill (S.5), which casual estimates put at around $500 million per year for the first four active years of the program (2026-2030).

Let’s put these numbers in context. Vermont’s overall budget for 2023 is $8.65 billion.

That is up from just under $6 billion in 2019, the last year before Covid federal emergency money flooded into state coffers. Vermont has always relied heavily on federal funds to pay our bills, and with the one-time pandemic infusions still trickling in this is more true than ever. At least half of that $8.6 billion is now coming from Washington, but this will not continue for much longer. 

When that money is gone it will place more pressure on local taxpayers to keep funding programs set up with federal dollars. Witness the coming $30 million property tax increase to make permanent the pandemic policy of universal free school meals, and the $20 million to temporarily extend the program to house homeless in hotels. 

So, the responsible thing to do here would be to keep whatever tax capacity powder we have left (if any) dry in anticipation of more situations like these and/or any emergencies arising from a predicted recession and revenue shortfall after 2024. But that’s not happening.

Instead, our elected representatives want to add around a $100 million per year payroll tax (0.55 percent out of every Vermonter’s paycheck) to pay for a new Paid Family Leave program. Another payroll tax of 0.42 percent ($114 million annually) will be added to pay for expanded childcare subsidies reaching families earning over $200,000 a year. Call that a total 1 percent payroll tax, and it means a median income household in Vermont will be paying a new, additional $677 tax on their income that will only go up over time. (It’s also yet another incentive for businesses to leave Vermont.)

Put on top of this the added property tax burden from the free meals program, an estimated $500 (at least) per household “Clean Heat” fee for homes that burn oil, propane, gas, or kerosene, a twenty percent increase in DMV fees for license and registration renewal, along with a few other things here and there, and all of a sudden folks are looking at losing somewhere around $1500 a year of whatever disposable income we currently have left.

We can have honest debates over the merits of paid family leave programs, or providing free meals to school kids, or transitioning away from fossil fuels. But, in the context of our current economic capacity, there is no debating the reality that our tiny state cannot afford these programs as proposed. 

Moreover, even if we could afford to raise this money, another largely ignored reality is that the workforce in Vermont doesn’t exist to operate the programs. Weatherize 90,000 homes and install 140,000 heat pumps under the Clean Heat Standard? We’re about 5000 trained workers short. Expand high quality childcare with teachers who have BAs or better? They aren’t here. Why is our workforce stagnant?  The high cost of living caused by high regulation and high taxes like these are driving people to other states where their skills are just as much in demand, and they can keep way more of what they earn. 

It’s this lack of critical thinking and rational planning that earned Vermont’s the infuriating rank of 44^th worst in the country for tax dollars’ return on investment. Lots of bucks; little bang.

There’s one more tax increase we can expect. Our lawmakers are set to pass a bill to more than double their own compensation at an estimated additional annual cost to the taxpayers of $4,759,000. That’s $26,439 per legislator. They say they can’t afford to live in Vermont. How ironic. 

Rob Roper is a freelance writer who has been involved with Vermont politics and policy for over 20 years. This article reprinted with permission from Behind the Lines: Rob Roper on Vermont Politics, robertroper.substack.com