Vermont budget proposal hinges on new taxes and fees

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A year after fighting with lawmakers over new taxes, Vermont Gov. Phil Scott pitched $18 million of revenue raisers in his $6.1 billion budget proposal.

The Republican governor, who was elected to a second term in November, called for $10 million of new taxes and $8 million in fee increases during his budget address before state lawmakers last week. Among Scott’s proposals for the 2020 budget is applying the state’s 92% tobacco tax toward toward e-cigarettes and vaping products, which would raise around $1 million of new revenues.

"It’s not my first instinct to add a tax, but with a growing health risk for our kids, I’m proposing to levy the same tax as we do on tobacco products,” said Scott in his budget remarks.

Scott’s budget plan also hinges on $7 million of increased sales tax revenues by adding new collection requirements for online marketplaces following the U.S. Supreme Court’s landmark Wayfair decision last June. He said an additional $2 million could be raised if lawmakers modernize Vermont’s rooms tax law to treat online bookings through third party websites the same as reserving through a hotel.

Scott said his administration will present a fee bill that would generate $8 million of new revenue. A large chunk of the new monies, $6 million, would derive from changes in broker-dealer agent fees, appointment fees, adjuster license fees and fees paid by mortgage brokers and lenders, according to Scott. Another $1.7 million in fees would be generated from changes to fees in the Office of Professional Regulation including at state parks.

The state legislature and Scott have until June 30 to finalize a budget plan before the new fiscal year takes effect on July 1. A dispute over raising taxes nearly led to the state’s first government shutdown last year before Scott and legislative Democrats crafted a compromise agreement that raised non-residential property tax rates by 4.5 cents.

Vermont lost one of its triple-A ratings last October when Moody’s Investors Service downgraded the state to Aa1 citing low economic and population growth stemming from aging demographics. Green Mountain State general obligation bonds are rated AA-plus by S&P Global Ratings and AAA by Fitch Ratings.

Scott stressed in his budget address that the key to combating the state’s demographic challenges is attracting new residents. Vermont’s population was estimated at 624,000 in 2017 making it the second-least-populous state ahead of only Wyoming.

“In every corner of our state, there are communities, businesses and non-profits – large and small – ready to grow, but good jobs go unfilled because we need more working-age people,” said Scott. “Every new worker we recruit to live here allows a business, a community, a school and tax revenue to grow.”

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