The miscellaneous tax package raises $48 million in fiscal year 2017 across the general, special and the transportation funds. Taxes and fees account for $38.7 million of the total; new revenues for the transportation fund come in at $9.6 million.
The revenue bill includes new rooms and meals taxes on AirBnB ($1 million) and increases in the bank franchise tax ($2.3 million), the gross receipts tax on fuel ($1.3 million) and employer assessments ($6 million) for workers who don’t have health insurance.
The bulk of the rest is made up by a $20.8 million increase in mutual fund company fees. The bill generates $3.7 million by shifting from quarterly to monthly filing deadlines for bank, telephone and gross receipts taxes. Other fees bring in $3 million.
The committee voted 7 to 4 to pass the package before legislative counsel had fully assembled the miscellaneous tax bill Wednesday evening. A schedule of the discussion, testimony and vote was posted retroactively on the legislative agenda for House Ways and Means.
Rep. Janet Ancel, D-Calais, said the last-minute decision to vote on the bill ahead of schedule was driven by several committee member absences planned for the second half of the week. Ancel wanted to ensure that Reps. Johanna Donovan, D-Burlington, and George Till, D-Jericho, who both favored the package, were able to vote on it Wednesday night. Typically, tax and budget bills are voted out of committee concurrently.
“We were forced to do this a day or two early, which I think is far from ideal,” Ancel said Thursday. “I think it’s much better we do them at the same time.”
Thursday afternoon, the committee reaffirmed approval of the bill in a 6-4 vote.
Ancel said the committee would revisit the bill if the House Appropriations Committee finds more savings before finalizing the budget bill.
“We would eagerly go back into the bill and find reductions, if there’s an opportunity to do that,” she said.
Rep. Don Turner, R-Milton, the House minority leader, said the tax package is “disappointing.” He criticized the move to raise more revenue on top of the $30 million package that passed as part of the current year’s budget.
“There’s no end in sight,” Turner said, “so we’re just in this cycle where we’re going to keep spending and having to raise new revenue every year to meet the spending when we really have to structurally fix the budget.”
Turner raised concerns about two of the tax bill components in particular: the employer assessment and the fuel gross receipts tax. Those new revenue streams “are going to cost Vermonters jobs,” he said.
Details of the package
Mutual fund fees
The main component of the tax plan is a $20.8 million boost in fees for mutual funds. Gov. Peter Shumlin proposed doubling the fee the state charges from $600 to $1,200.
The committee heard no testimony against the increase, and so decided to boost the annual fee to $1,500, which Ancel said is still in line with neighboring states. There is also a first-time filing fee of $2,000.
“It was one of those rare cases where we had the opportunity to bring in some revenue consistent with what other states do without, frankly, without hearing any objection,” Ancel said.
Employer assessment
The second largest chunk of the package, $6 million, comes from an increase in the employer assessment, which is a revamped version of a proposal the Senate Finance Committee pitched last year.
The assessment is a monthly fee on employers that do not offer health insurance for employees. The proposal tiers the tax for businesses with 20 to 99 employees and those that have 100 or more workers. Under current law, employers pay about $600 a year for each worker who isn’t offered insurance. That rate goes up by $210 and $249 per worker, respectively. The employer assessment currently raises $19 million; the increase would push the revenues up to $25 million.
Ancel said the tax holds employers responsible for some of the cost picked up by the state through programs like Medicaid.
Dan Barlow, a lobbyist for Vermont Businesses for Social Responsibility, said the assessment helps to even the playing field between employers that offer health insurance and those that do not.
Businesses that offer insurance are competing against others that benefit from state health insurance programs, he said.
The proposal has met with resistance from some, including Rep. Adam Greshin, I-Warren, who say the increase will be a disincentive for employers to hire certain people. Greshin is an owner of Sugarbush Resort, which has a large payroll and would be hit by an employer assessment increase.
“We’re penalizing employers for providing employment to people who do not have health insurance,” Greshin said.
Bank franchise tax
An additional $2.1 million comes from an increase in the bank franchise tax for big banks that hold $750 million in deposits and assets. Collectively, banks, large and small currently pay about $10 million a year in the franchise tax, which has not been increased since 1997. In hearings this week, bankers testified they can’t afford the proposed tax hike because their profit margins have been squeezed by competition from online, out-of-state banking and nonprofit credit unions that act like banks but don’t pay sales, corporate, property or franchise taxes.
Greshin criticized the measure for creating an uneven playing field. He said the tax “sends the all too typical message that big is bad.”
AirBnB
The miscellaneous tax bill includes a directive for the Department of Financial Regulation to work toward an agreement with online platforms like AirBnB that allow people to rent out properties for short-term stays. AirBnB customers don’t pay local rooms and meals taxes.
The committee booked about $1 million, with the expectation that the state will collect rooms and meals taxes that are currently falling through the cracks, according to Ancel.
Transportation tax
Ways and Means booked $10.5 million in new revenue into the transportation fund. The committee increased transportation fees in accordance with inflation, according to Ancel.
The cost of driver’s licenses, registrations and plate renewals will go up a few dollars a year.
“People feel those changes, but they’re modest within the framework,” Ancel said. “People also really value their roads and bridges, and so most people are willing to pay a few dollars more for a driver’s license.”
Gross receipts tax
Lawmakers clashed over a proposal to increase the fuel gross receipts tax to 0.75 percent, from the current 0.5 percent, for home heating oil, kerosene, propane, dyed diesel, natural gas and coal.
In a 6-5 vote, they agreed to raise the tax to funnel $1.3 million in additional monies into low-income home weatherization programs. The fuel tax would be paid monthly instead of quarterly, which would bring $900,000 in additional revenue to the state for fiscal year 2017.
The higher tax is roughly 2 cents per gallon at a rate of $2.65 per gallon of fuel oil. At $4 a gallon, the 0.75 tax is the equivalent of 3 cents a gallon, according to Matt Cota, a lobbyist for the Vermont Fuel Dealers Association.
If the increase becomes law, the total amount raised by the gross receipts tax on fuel will be $5.5 million from retail dealers of propane, oil and kerosene; $750,000 from natural gas companies; and $4 million from electric utilities (the rate for utilities would not go up), Cota said.
The weatherization fund will drop from $11 million to $8 million this year, according to housing and environmental advocates. The state has insulated about 1,500 to 1,800 homes a year since 2011. That number would be reduced to about 1,100 in the coming year if the state doesn’t increase funding.
