Senate leaders are exploring a major change to Vermont's sales tax. The goal of the plan is to give the state a more sustainable revenue base in the future.
Vermont's six percent sales tax raises roughly $230 million per year for the General Fund and another $123 million for the Education Fund. It's Vermont's second largest broad based revenue source. The personal income tax is number one.
Chittenden Sen. Tim Ashe, chairman of the Senate Finance committee, is concerned about the stability of the sales tax. Ashe says revenue from the tax is stagnant because Vermont's economy is becoming more service oriented and services aren't subject to the sales tax.
For instance, if you have your car repaired, the sales tax is imposed on the parts but not the labor. "It's an important policy choice of whether we want to continue to rely on a sales tax to fund a good portion of the General Fund operations with a base that isn't going anywhere,” says Ashe.
Senate President John Campbell wants to include a number of professional services under the scope of the sales tax. If this happens, he says the tax rate can be reduced. “There would be more items that heretofore have been exempt from the sales tax, which we find that really some of them should not be,” says Campbell. “So by broadening the sales tax base we would be able to actually lower the rate and raise more money."
"If we do not think about these structural revenue issues, we'll be back next year with another $40 to $50 million budget gap, we'll be back the next year, we'll be back the next year and so on." - Sen. Tim Ashe
Finance chairman Ashe expects a fair amount of opposition to this plan. "It would be a bold disruption to the status quo,” he says. “On the other hand, if we do not think about these structural revenue issues, we'll be back next year with another $40 to $50 million budget gap, we'll be back the next year, we'll be back the next year and so on."
Ashe is hoping to have a draft plan completed by the end of the sessio