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Final Push: End of session battles and negotiations

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by Representative Heidi Scheuermann (R-Stowe) This is the final scheduled week of the 2019 Legislative Session, and, as is the case every year, the end-of-session final pushes and battles are front and center. With regard to the bill that would provide the opportunity for school districts forced to merge a year extension to do so (which passed the House by 134-10), I continue to be exceptionally disappointed in, and frustrated with, the House conferees on the H. 39 Conference Committee.
 
To be clear, the Senate conferees, led by Senator Phil Baruth (D-Chittenden), were working diligently and negotiating in good faith.  In fact, they came to the table repeatedly with fair compromises in an effort to get the legislation across the finish line.  Unfortunately, that was not the case with the House conferees.  A display of their views came at their last meeting, when the proposal from the House was to allow just 3 districts to extend, followed by the lead House negotiator indicated his support for a bill that would include a few other items regarding Act 46, but would not include the opportunity for a forced merger extension.
 
Given that the House version of H. 39 allowed for 26 districts to extend if they wanted to (the Senate gave all districts the option), these proposals did not reflect in any way the view of the House.
Understandably, the Senate conferees had had enough, and discharged their conferees to appoint new conferees in the hopes that the House would do the same.  The House did not do so.
 
The House is not the only roadblock to the merger extensions, though.  It is important to make clear that the Vermont Agency of Education has been next to no help throughout this process either.
 
In the particular case of EMUU and Stowe, not only did they not support their initial recommendation that EMUU and Stowe not be merged during the months the Vermont State Board of Education was considering its final State Education Plan under Act 46, but they have been fighting against even this minor one-year extension since it was proposed.
 
Combined with the opposition from the Vermont School Boards Association and the Superintendents Association (both of which we are members of), I think many of us feel like we're pushing a rope.
 
Still, the House has refuses to do so.
 
In the meantime, the Senate continues to display its commitment to passage of the bill by including the H. 39 language in another education bill.
 
A tri-partisan group of House members are also putting forward a resolution to the full House that would reaffirm the body's support for H. 39, and request that new conferees be appointed to the H. 39 Conference Committee, in the hopes that the additional pressure will make a difference.
 
At this point, I remain committed to continuing my push to get the opportunity for a EMUU-Stowe extension across the finish line, and am working closely with Lamoille County Senator Rich Westman, in addition to Rep. Dave Yacavone.  But, I am not optimistic.
Taxes, Taxes, Taxes
Chapter One 
A number of proposals to increase taxes on Vermont families and businesses continue to emerge and progress.
 
One of the most aggressive packages being considered right now is especially concerning to me.  As it passed the House, H.541 included a number of changes to our tax code that were important:
  • An increase in the estate tax exclusion from $2.75 million to $4.25 million in January 2020, and $5 million in January 2021;
  • An expansion of the Downtown Tax Credit Program from $2.4 million to $2.6 million;
  • Changing the definitions of "operator" and "rent" to include Online Travel Agencies, to ensure the OTAs remit to the state the entire tax collected from the client; and
  • Changes to the Land Gains Tax such that it would apply to a much smaller number of transfers - only land subdivided by the transferor within 6 years prior to the sale or exchange would be subject to it, and it exempts land transferred in a downtown, village center, or new town center.
Unfortunately, it also included a change to the tax on Capital Gains that I have come to realize will have more of an impact than I had though on our state's small business families.

 

Specifically, the proposal decreases the exemption of the gain taxable from 40% to 30%, and caps the exemption at $450,000.

 

While I ended up supporting the bill when it came to the House floor, I now regret doing so.

 

I simply didn't understand well enough what the real world impact of the Capital Gains tax changes would be, and I mistakenly thought the increase of the Estate Tax to $4.5 million and then $5 million was worth the changes in the treatment of Capital Gains.

 

It isn't.

 

Don't get me wrong, the bill would still have passed the House without my support, but I do regret supporting it.
 
 
Simply put, the tax package as passed the Senate would be a punch in the gut to many of our small businesses and their families who have dedicated their lives to them.
 

Taxes, Taxes, Taxes
Chapter Two
 
 
To replace those funds diverted from the Education Fund, the bill includes the institution of the sales tax on Software as a Service (otherwise, known as the "Cloud Tax").
 
As I have made clear numerous times, it is absolutely critical that we put into place a sound program to clean our waterways, and that those efforts be funded in a fair, sustainable way.
 
Toward that end, I have always advocated for a funding source that is fair and broad-based, and one that has a nexus to water.  I have also been clear that the funding source not put at risk our economic growth.
 
In my view, the proposal that passed the House last week is problematic.
 
First, as a result of my inquiry on floor of the House, it was made clear  that the reason the rooms and meals tax is being used to fund clean water is because the  committee believes tourism is the nexus to clean water.  if you recall, this view is shared by many in Montpelier, as legislative leaders have proposed time and again putting the burden of clean water on our state's tourism industry.  And, I have fought it time and again.  
 
My fear with this proposal is once this nexus is approved, the rooms and meals tax will be the funding source to which the legislature turns each time there is more money needed for our clean water efforts.
 
Second, for four years, I fought to exempt Software as a Service from the sales tax.  And, after four years of battle, we were successful in 2015 in exempting so-called "cloud" services from the sales tax.
 
In fact, the only reason it was instituted in the first place was because the Vermont Department of Taxes issued a Guidance Document  in 2010 (revised in 2011) stating that prewritten software was subject to the sales tax "regardless of its method of delivery," and that "prewritten software that is licensed for use and available from a remote server is also taxable."
 
I was pleased, therefore, that we finally prevailed in 2015 to remove the tax.
 
While earlier this year I did express to the Chair of Ways and Means that I might be open to considering the cloud tax to fund clean water, I did need to understand better the real world implications of this tax now (4 years later) on our state's technology sector.
 
 
I am pleased, therefore, that while our state's technology industry didn't have a place at the table when the tax was being considered, they have taken a place in recent days, and, have made clear their concerns with the proposal.
 

 

I am hopeful that the Senate will both reject taxing the cloud, and reject using rooms and meals tax to fund our clean water efforts.

 

Of course, I am also very hopeful that the Senate and the Administration will find another avenue to fund clean water, or, better yet, find the funding within existing revenue.

Other Items of Note
 
Minimum Wage
 
 
 
As you know,  I have expressed many times my concerns about the mandatory increase of the minimum wage to $15.00.
 
While I certainly understand the challenges our working Vermonters face in terms of earnings, and want to do all I can to ensure our economy grows so that more, and better paying jobs in the private sector are created, my concerns remain with regard to the actual, real-world impact this would have on Vermont workers and their families, and our state's small businesses.
 
Paid Family Leave
This legislation, too, is one that has seen a rift between the House and Senate, and as such, it is unclear, what the end product might look like.
 
 
 
While it is unclear what might emerge, at this time, opposition from Governor Phil Scott to a mandatory Paid Family Leave Program remains, though he (and I) continue to support a voluntary program.
 
If you have any questions or concerns about any of the items above, or any other issues that arise, please feel free to contact me.
 
Representative Heidi E. Scheuermann
Stowe, Vermont