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Editor’s note: this story has been updated with discussions in the Senate Finance Committee on Thursday afternoon.
The COVID-19 pandemic is poised to put a massive strain on Vermont’s tax coffers, as fiscal analysts project that in the next three months the state could face a revenue shortfall of $200 million due to diminished economic activity and delayed tax payments.
A drastic reduction in spending by taxpayers and businesses will cause a loss of $80 million to $115 million across all funds, the Joint Fiscal Office is projecting.
And if the Vermont Department of Taxes pushes off the date at it which penalizes Vermonters for not filing state taxes, it would mean Vermont won’t see $120 million-140 million in general fund revenue until the next fiscal year.
The department is strongly considering this as a move to help provide relief to taxpayers. The federal government earlier this week pushed back the date it would begin penalizing taxpayers for failing to file their taxes from the typical April 15 deadline, to July 15.
The Joint Fiscal Office laid out COVID-19’s potential impacts on state tax revenue in a document that will be presented to the Senate Finance Committee this afternoon starting at 3 p.m.
The state’s general fund could lose $30 million-$50 million before the 2020 fiscal year ends in July because of a reduction of personal income and meals and rooms taxes.
This lost revenue could stem from people losing jobs, self-isolating, and not spending as much in the coming weeks, according to Graham Campbell, a fiscal analyst with the Joint Fiscal Office.
The education fund could take a $35 million-$45 million hit due to lost sales tax, purchase and use and meals and rooms tax revenue.
Campbell said during the pandemic “people aren’t going out buying cars, buying stuff, going to restaurants.”
The state’s transportation fund could see a loss of $15 million-$20 million because of lower than expected purchase and use and gas tax revenues.
But Campbell highlighted one piece of good news. Since state officials conducted their last revenue forecast in January, Vermont has seen a $35 million windfall in previously unexpected corporate tax revenue that could help offset some of the losses in the general fund this year.
Campbell said those tax payments likely stemmed from corporate mergers and acquisitions.
The state also has reserve funds it could be able to rely on.
During Thursday’s Senate Finance meeting, Karen Horn, a lobbyist for the Vermont League of Cities and Towns, also expressed concerns about how municipalities in Vermont will see less tax revenue as a result of the pandemic.
She said that towns expect they will see an increase in requests for property tax abatements, late payments of taxes and fees, and lower local option tax revenues.
“Local officials have heard from small businesses that they will need to choose between making payroll or paying sales, meals, rooms and alcohol taxes for the previous month and then will be in arrears on taxes,” Horn wrote in a letter to the finance committee.
The league is asking lawmakers to help them make up for what they expect towns will have to contribute towards education spending next year, if they grant a large number of property tax abatements.
Sen. Ann Cummings, D-Washington, the chair of the Senate Finance Committee, noted that offering that support could be challenging given the revenue strains the state will be facing.
“We already know we’re going to have a hole in the Ed Fund,” Cummings said. “If we just had every town abate everybody, we don’t have the money to pay you.”
The tax department still hasn’t made a final decision on whether it will delay the date at which it penalizes late tax filers, from April 15 to July 15 — effectively extending the deadline three months, as the federal government has already done.
Vermont Tax Commissioner Craig Bolio said he was hoping the Scott administration would have “some more solidified ideas and guidance” on tax policy by the end of the week.
