[I]n the 11th hour of the legislative session, senators have come up with a new plan to fund clean water: a 1% increase to the rooms and meals tax starting in January 2020.
Both bodies have committed to devoting $50.5 million toward clean water in 2020, but have yet to settle on a plan to fill an $8 million funding gap.
During a Senate Finance Committee meeting Thursday afternoon, Sen. Chris Pearson, D/P-Chittenden, echoed by Sen. Becca Balint, D-Windsor, said they wanted to consider alternatives to the “cloud tax” on online software proposed by the House.
The committee then debated options ranging from a tax on luxury clothes, an increase to the fee on trash disposal, and an increase to the property transfer tax on homes over $500,000.
Committee members, with pencils in hand for quick calculations, considered various combinations. Graham Campbell, fiscal analyst with the Joint Fiscal Office, reminded committee members that the amount required by the clean water fund would increase over time.
The Scott administration’s water funding plan contemplated devoting $12 million from the estate tax in 2021. It would have also shifted revenue from the property transfer tax, which currently goes into the general fund.
Sen. Randy Brock, R-Franklin, who had remained silent for most of the debate, said exasperatedly toward the end that the committee was weighing “a bunch of bad choices.”
“We didn’t talk about candy, we might as well make children mad at us while we’re at this,” he said.
The committee settled on increasing the rooms and meals tax from 9 to 10%, with 1% dedicated to the clean water fund, as they felt it would be simple to administer.
“I’d like to let this float in the ether,” committee chair Sen. Ann Cummings, D-Washington, said of the proposal. Senate Finance is expected to vote on the proposal Friday morning.
In an interview after the meeting, Cummings said the cloud tax was not off the table for future years, but said the committee needed more time to figure out how it would work. She also said the Senate still has to negotiate with the House on a final proposal.
When the clean water funding bill first moved through the Senate, the body made no effort to come up with a new revenue source, leaving that decision to the House.
After taking weeks of testimony on the issue, House members settled on a “cloud” tax on software stored and accessed on the internet.
Vermont’s tech community quickly came out in opposition to the plan, arguing that it would stifle efforts to expand the industry in the state. Senate leader Tim Ashe also opposed the proposal, saying it was too difficult to even define what was being taxed.
Treasurer Beth Pearce sent a letter to legislative leaders this week reiterating the urgency of identifying a sustainable source for clean water funding.
Democrats backed off efforts to raise new revenue for lake clean up efforts last year amid internal disagreement and veto threats from Gov. Phil Scott.
Scott said he was not a fan of the cloud tax during his press conference on Thursday morning. His spokesperson, Rebecca Kelley, said in an email Thursday afternoon that he had the same position on a rooms and meals tax increase.
“He hasn’t changed his mind since this morning: he doesn’t want to see another tax increase when we have the opportunity to use existing resources — particularly with what’s expected to be a $50 million surplus with a potential FY20 upgrade,” she said, referring to next year’s revenue projections.
This story will be updated.
