Economic stewardship must be central to veto session decisions

By Megan Sullivan

Editor’s note: Megan Sullivan is the vice president of government affairs for the Vermont Chamber of Commerce.

The 2023 legislative session has been underscored by new and increased taxes and fees on both individuals and businesses, leading to $150 million of likely cost increases for Vermonters. This significant burden is particularly concerning given the ongoing economic pressures of high inflation, workforce shortages, and declining state revenue from personal income tax. All of this is happening as the state settles into a post-pandemic baseline.

 While economists from both the Legislature and the Governor’s Administration warned that revenue would decline, state revenue is falling faster than predicted. The General Fund, Transportation Fund, and Education Fund all failed to meet monthly expectations in April. This was the second month in a row that revenue targets were not met, emphasizing the need for fiscal responsibility to be at the center of decisions made by the General Assembly during the upcoming veto session. 

Record-high spending in recent years has been possible due to the influx of one-time federal funds for pandemic relief. However, without the ongoing federal aid, legislators seem determined to maintain record levels of government spending by raising new taxes and fees on Vermonters. Amid economic uncertainty, businesses, in particular, are expected to take on several new tax measures. The average Vermont business has five employees, and the ramifications of increased costs will be felt across communities. This means that our local coffee shops, general stores, plumbers, mechanics, and breweries, as well as those they serve, will all be impacted. 

The veto session will be an opportunity for legislators to review and consider the long-term implications of excessive spending proposals on the economy. 

The collective impact that legislative action, or inaction, will have on businesses and individuals is already staggering:

The first-ever state payroll tax would have working Vermonters set to pay $100 million annually.

DMV fees are poised to increase across the board by $20 million.

Licensure and renewal fees through the Office of Professional Regulation would increase for many of Vermont’s regulated professions.

Fuel costs could increase by 70 cents a gallon with the creation of the Clean Heat Act.

Property taxes are expected to rise by an additional $30 million with an increase in state funding for nutrition programming.

A Trump-era tax on business was upheld. The State and Local Tax (SALT) cap deduction workaround would have saved Vermont businesses $20 million in federal taxes but was derailed in the final days of the session.

 These measures will further strain Vermonters, limiting the ability to invest, save, and stimulate economic growth. While we believe in the importance of funding critical programs and addressing pressing issues, we also know that it’s possible to achieve a balance between spending and the economic vitality.

 The Vermont Chamber of Commerce encourages legislators to seek input from constituent businesses and carefully evaluate the potential long-term consequences that veto session bills will have on Vermont. We can strike a balance between addressing critical needs and ensuring a favorable business environment. By centering economic stewardship, we will foster a prosperous Vermont for all.