by Mike Faher/The Commons When describing the Vermont Chamber of Commerce’s lobbying efforts, Betsy Bishop employs the standard devices — pie charts, anecdotes, and a few “offense” and “defense” football analogies. But the chamber’s president also has a relatively new tool, and it’s got no pictures or brightly colored graphs. Instead, it’s a dense, still-expanding document running to nearly three pages and featuring more than 50 bullet points detailing taxes, fees, and mandates that have been imposed recently on Vermont residents and businesses — as well as those that could be considered in 2016.
Betsy Bishop
Dubbed the “total impact list” (SEE LIST BELOW), it’s designed to ensure that state lawmakers look backward even as they seek new ways to address future budget deficits.
In the next legislative session, Bishop expects to use the strategy to combat proposals such as an expanded sales tax, a carbon tax, and mandatory sick time.
“It’s not just about the issue that you’re addressing today,” Bishop said. “We’re looking at the cumulative impact over the last five years of the amount of taxes, fees, and mandates that have been loaded onto businesses. That’s starting to really hurt. Give us some time to absorb what you just did.”
A ‘structural deficit problem’
Bishop’s remarks came October 14 at a breakfast sponsored by the Brattleboro Area Chamber of Commerce ("We have a total of 22 stops on this economic growth tour in every area of the state. We’ve finished 15 with 7 more to go.") Several Windham County lawmakers were in attendance, and she made sure to thank those who had worked during the 2015 session to pass a bill that includes an additional $200,000 for marketing aimed at tourism and economic development.
“It was a paltry sum that was ultimately approved, but I’m thrilled with that paltry sum, because it was a start,” Bishop said.
She also lauded several legislative changes from 2015, including elimination of the “cloud tax” targeting digital software and entertainment services, updated regulations for limited liability corporations, and expanded eligibility for the Vermont Employment Growth Incentive program.
And Bishop took time to praise the budget-cutting work that she witnessed during the past session.
“It’s really tough to do,” she said. “There’s nothing in our state budget that’s easy to cut. There’s not fat there. There’s real need there.”
Nevertheless, Bishop’s main theme was clear. She recounted recent headlines about state budget gaps, including news that the state’s Medicaid program is far over budget both for the current year and, according to current projections, for fiscal 2017.
“This is about the fifth year in a row that we’ve seen [a budget] gap,” Bishop said. “That’s not a temporary problem. That is a structural deficit problem, where the state has continued to think about how we can spend more when our revenues are lagging.”
Increased state spending, she argued, is taking a toll on Vermont’s businesses — both large and small.
Bishop produced a pie chart detailing more than $52 million in new taxes, fees, and mandates approved by the Legislature in 2015. Big chunks of that figure come from $22.9 million in income tax changes, $7.9 million from a new soft-drink tax, and $7.5 million in fees to support expanded clean-water efforts.
“In addition to that, my guess is, we will be looking for new revenues for water cleanup in the coming years,” Bishop said.
Financial and policy concerns
Looking ahead to the legislative session that begins in less than three months, Bishop detailed a number of the Chamber’s financial and policy concerns, including:
• Sales tax expansion to services such as accounting, hair styling, legal work, dry cleaners, and others.
Bishop said the Senate Finance Committee debated this concept in the spring as a way to possibly lower the sales tax by broadening its base. But lawmakers couldn’t come up with a way to make it work, and Bishop was no fan of those proposals.
“Just so no good idea goes to waste, the Senate Finance Committee instructed the Tax Department to go away over the summer and fall and come up with a better strategy so they can do this next year,” Bishop said. “Will it happen? I’m not sure. Will it be talked about at length? Yes, it will.”
• Increasing the rooms and meals tax, possibly to pay for water cleanup. The Chamber opposes any such increase.
Rooms and meals is “a favorite tax to talk about every year,” Bishop said. “We have been successful in the last three years in defeating that idea, and we will work hard to push that back [in 2016] as well.”
• Instituting a carbon tax. Such a levy would be designed to cut reliance on fossil fuels, but the Vermont Chamber of Commerce believes it would put Vermont manufacturers at a “competitive disadvantage,” Bishop said.
“There’s a move [...] to really look at [a carbon tax],” she said. “I see that as an issue that will get a lot of discussion, but it’s unlikely that it’s going to pass this year. It’s the type of issue that, if it’s going to pass, it’s going to take several years of discussion.”
• Clarifying the state’s definition of “independent contractors.”
Bishop said there is a need to “create a path that allows an independent contractor to work here as an independent contractor and not be designated by the state as somebody’s employee. That has to happen. These people are independent workers in Vermont. They want to be independent workers.”
While Bishop said legislators from all party affiliations support making a change on that front, she isn’t optimistic.
“Right now, we have no clear path, and we haven’t for years,” she said. “We will continue to work on that.”
• Allocating more money for tourism and economic marketing. “We got that started,” Bishop said. “We intend to bring that back [for additional funding].”
An important element of the marketing initiative, she said, is to send a message to those who have left Vermont and are looking for a way to return. “We need to reach that population and get them to think about Vermont as a great place to be,” Bishop said.
• Medicaid reimbursement rates. While cutting those rates might be an easy tool for reducing the budget, Bishop believes it will not work in the long run.
That belief was seconded by Steve Gordon, president and chief executive officer of Brattleboro Memorial Hospital.
“I’m very concerned about Medicaid, because the easy thing to do [...] is going in and just slashing reimbursement rates for providers,” Gordon said. “The problem with that is, it exacerbates the cost shift, going back to all the businesses that pay into health insurance. Their rates are increased, and you get into this vicious cycle.”
“The state’s got to look at how Medicaid is administered in this state, starting in Montpelier and the departments that are involved in the Medicaid budget,” Gordon added.
• Mandating paid sick days for most Vermont workers. That initiative passed the House in April but has not yet been approved by the Senate, and Bishop said it is unpopular among Chamber members.
“We did not support it when it came through the House,” Bishop said. “We’re very concerned about the impact — another mandate on businesses when they’re already trying to absorb new taxes and regulations.”
Among those attending the Oct. 14 meeting was state Rep. Tristan Toleno, a Brattleboro Democrat who has been a prominent supporter of the sick-day bill, H.187.
Toleno, who himself owns a small business, defended the bill as modest — for example, it does not apply to temporary or seasonal workers — and incremental. Employees must earn their sick time, and employers can impose a waiting period, during which new hires cannot use their time off.
The Oct. 14 forum featured talk of businesses that cannot find qualified workers, and Toleno argues that paid sick days can be a retention tool for good employees.
“They will earn it by proving long-term value to their business,” Toleno said. “When businesses start to look under the hood, they’re going to see that this is a very reasonable bill.”
| The Total Impact List for Taxes, Fees & Mandates The Vermont Chamber has created this list for taxes, fees and mandates created by government action between 2010 and 2015, with an eye to 2016. Email (Kendal Melvin [email protected]) if you have one to add to the list. Passed in 2015 • Increasing government imposed fees, including $220,300 in new restaurant licensing charges, $65,400 in new bakery licensing charges, and $103,000 in new lodging licensing charges. Additionally, $444,000 in new revenue will be generated from increases in Act 250 fees. Total fee increases raise $3.6 million; • Various income tax changes: capping itemized deductions at 2.5 times the standard amount (excluding charitable giving and medical deductions which are fully allowed), eliminating the deduction of state and local income taxes, and the implementing a three percent minimum tax for filers with over $150,000 adjusted gross income. Raises $22.9 million; • Raising the cigarette tax $0.33 and commensurate increases in taxes on other tobacco products, making the State cigarette tax $3.08 per pack, raises $3.2 million; • Applying the State meals tax to vending machine sales, raises $1 million; • Applying the State sales tax to soft drinks, raises $7.9 million; • Increasing the property transfer tax by 0.2 percent and increased fees for large and medium sized farms, as well as, increased executive fees for other water quality related environmental permit applications for water clean-up, raises $7.48 million; • Raising the nonresidential property tax rate two-cents in FY2016 to $1.535 per $100 of assessed value, and up to $1.59 per $100 of assessed value in FY2017 and thereafter; • Appliance retailers required to carry more energy efficient products, affecting retail price points, product mix, overall gross products and possibly limiting consumer choice; • Woodstock and Colchester choose to adopt a local option tax of one percent on meals, alcoholic beverages and short-term room rentals; • Mandating the Vermont prevailing wage and fringe benefits, including paid vacations and sick leave, for construction workers on State projects; • Mandating employers to provide the total cost of employer-sponsored health care coverage on box 12 of W-2s; • Tightened regulation of the rent-to-own industry, setting limits on the amounts rent-to-own stores can charge and increased disclosure of contract terms to customers; and • Implementing a State false claims act, with the potential to affect a wide range of businesses including the health care industry, financial and defense businesses. (continued on back) Upcoming in 2016 • Lowering the sales tax rate to 4.75 percent and taxing services like accountants, hair dressers, lawyers, dry cleaners and more; • Removing the sales tax exemption for funeral charges, clothing, residential electricity and gas, advertising materials and documents; • Removing the meals tax exemption for delicatessen sales by weight or measure; • A half-cent excise tax on sugar-sweetened and diet beverages, raises $14.6 million; • Half of one percent increase in the rooms, meals and alcohol taxes to pay for water clean-up; • Implementing a fee on moorings or subcategories of moorings, such as private moorings versus commercial moorings; • Mandating paid sick leave, costing employers up to $14.3 million annually; • Annual increase in employer healthcare assessment; • 7/10 (or 3/10) of one percent payroll tax to address the Medicaid cost-shift; • Mandating a paid family and medical leave program, funded through a .5 percent income tax; • Increasing the insurance claims assessment; • "Ban the box" legislation, prohibits inquiries about criminal convictions on job applicants; • Mandating employment agencies to provide temporary employees with a lengthy written disclosure at the onset of each new work assignment; • Applying whistleblower protections to the private sector; • Collecting money from tax havens, raises $600,000; • Further regulating chemicals used in product manufacturing, preempting the pending Toxic Substances Control Act reform in Congress and federal law on the regulation and banning of chemicals; • Legalizing the recreational use of marijuana, triggering workplace safety, drug testing and workers’ compensation concerns; • A new carbon tax, placing manufactures at a competitive disadvantage; • Increasing the fuel tax by 0.5 percent each fiscal year starting in July 2015 until the tax reaches two percent for weatherization and thermal energy efficiency efforts. The tax would apply to the retail sale of heating oil, propane, kerosene and other dyed diesel fuel delivered to residences and businesses. The tax would also apply to natural gas, electricity and coal; • A $2.00 fee on motel and hotel rooms to support higher education funding and weatherization efforts; • An increase in the gas tax; • Solid waste fee for infrastructure, raises $3.5 million; • Taxing electronic cigarettes, raises $2 million; • Taxing dietary supplements, raises $1.8 million; • A $0.05 tax on plastic carryout bags, raises $1.5 million; • Eliminating the 40 percent capital gains income exclusion; (continued on next page) • On a Federal level, expanding eligibility for overtime pay, costing employers between $240 million and $255 million per year in direct costs; and • Also on the Federal level, broadening the definition of joint employer, which could have major implications for the restaurant and retail franchisor model. Five Year Look Back • Increasing the minimum wage over the next three years, currently $9.15 per hour and reaching $10.50 per hour in 2018 and indexed to inflation thereafter; • Increased State unemployment insurance costs as taxable wage base increases; • Increasing the employer health care assessment; • Reduced the research and development tax credit from 30 percent of the federal credit to 27 percent; • Created new Criterion 9(L) language under Act 250 and a new definition for “strip development,” leading to certain development projects either being denied or experiencing significant litigation, even when those projects fully comply with duly adopted local and regional plans; • Implementation of a provider tax, including $7.25 million in taxes on hospitals, $2.81 million on nursing homes and an increase of $140,000 in taxes levied on home health providers; • Implementation of an insurance claims tax, requiring each health insurer to pay an assessment of 0.8 percent on all health insurance claims, including the self-insured companies and the state’s three major insurance companies; • Increased the gasoline tax by about $0.06/gallon and the diesel tax by $0.03/gallon and tying increases in the tax to the retail price, anticipating inflation; • Mandated restaurants to separate organic wastes from their waste stream and compost on-site or arrange for transportation to a certified organic waste facility within a 20 mile radius by 2018; • Waste haulers and waste facility owners must provide collection and processing services for the newly mandated recyclable products, and forced to recover costs by raising fees for regular trash; • Mandated restaurants with 20 or more locations anywhere in the country to post the caloric content of their food items; • Mandating manufacturers and retailers to identify whether raw or processed food sold in Vermont was produced in whole or in part through genetic engineering; • Required employers with 50 or fewer employees to purchase insurance on Vermont Health Connect, and in 2016 employers with up to 100 employees will be mandated to use Vermont Health Connect. The Exchange currently does not work for businesses; and • Current and past pressure on retailers and related businesses in border towns because of tax and wage policy. Including additional stress on business in the Vernon area with the closure of Vermont Yankee |