Thank you to this week’s sponsor of our Advocacy Update:
April 22, 2022
The end is near, but how near? The target date for adjournment is May 6th, and some items are heading towards completion before that date; however, many others are not. Some legislators entered the “hurry up and wait” portion of the session, as negotiations moved to leadership or their committee finished up their work; by the middle of next week, most will be in this situation. This is the time of year for Committees of Conference and more inside baseball than can reasonably be conveyed in an advocacy update, yet you can count on updates on the changes as they come.
In this week’s update:
Omnibus Economic Development Bill Passes Senate
On Thursday, the Senate passed H.159, sending the long-anticipated bill over to the House. This bill is behind the typical schedule because when the Senate Committee on Economic Development, Housing, and General Affairs missed the crossover deadline this year, they decided to strike all the language in the House bill already sent to them to get around the deadline. The bill will be referred immediately to the House Committee on Ways and Means due to language in the bill that relates to that Committee’s jurisdiction. The Commerce Committee has already been working through it, and LCC has already testified.
We covered the bill’s content last week, and little has changed since the only thing added is a tax proposal, which we’ll cover below and ask you to advocate for. There are some gaps between the House and Senate here. The House is skeptical of the Senate’s relocation and recruitment initiatives and the need for any work related to incentives or a commission to leverage the film industry. The Committee is skeptical that a COVID-19 paid sick program could be functional or stand up. If you want a refresher on any of these programs, JFO summarized them in an easily digestible format.
It’s worth noting that the paid family medical leave and minimum wage bills used to make up the bulk of the work these committees did in any given session, and in this session, are basically footnotes in the larger economic development bill. There has been no substantive testimony on either of these issues. The House Committee has expressed some skepticism that a study is needed on paid leave, and questions were raised this week about raising the minimum wage given the prevailing/market wage.
Longtime LCC Priority, Federal Tax Deduction of Business Owners, Needs Support (Request Action)
We need you to advocate for this; at the bottom of this section, there is information on how you can help advance this work.
As part of the Governor’s proposed tax relief package in H.527, which carries most of the his tax relief proposal, a longtime priority of the Lake Champlain Chamber is included – a State and Local Tax (SALT) deduction cap workaround for pass-through entities (LLCs, S-Corps, and partnerships) that the IRS gave its blessing to in 2020. Vermont has been behind in adopting what about 24 states have already done, and about a dozen other states are working on. The Supreme Court this last week also refused to hear a challenge to the SALT cap, further cementing its prominence.
The workaround would allow a federal tax cut to Vermonters at no cost to the state and is widely understood in most high-tax blue states as a way to be competitive with other states with low taxes that do not offer as many services. This would be a monumental step to build back to a place of competitiveness taken away by the Trump Administration’s “Tax Cuts and Jobs Act,” which capped SALT as a punitive measure to blue states.
The proposal has been on the table since the beginning of the session with little interest until about a week ago, at which time two members of the Senate Finance Committee, Senators Sirotkin and Brock, decided to pursue the proposal in their other Committee, the Senate Committee on Economic Development, Housing, and General Affairs. The two worked out language with the Tax Commissioner and a plan to add it as an amendment to the Omnibus Economic Development bill. However, when they went to add the amendment during a Senate vote, the Chair of Senate Finance objected to the amendment because it was within the jurisdiction of her Committee and had not gone there. The issue was advanced only as a study, that way, the sponsors didn’t need to move it through the Finance Committee. Sidestepping the ensuing issues around politics and protocol, what ended up happening was masterful threading of the needle by the leadership.
LCC hopes to revisit the Sirotkin-Brock amendment originally proposed before it became a study. The bill will go to the House Committee on Ways and Means. We would like them to substitute the study language for the Sirotkin-Brock amendment. We need you to reach out to the members of each of this committee and convey your support for this tax relief.
Here are some main points to convey to legislators:
- 20 other states have enacted the SALT cap workaround, and so should Vermont! Other states are moving to do this, putting us at a further competitive disadvantage.
- We are sending $50 million to the federal government we do not have to – that money could be staying here in Vermont and being put to work to help Vermonters.
- The federal government will pick up the cost of this tax cut that the state legislators have within their power to create.
- As we see growing inflation, this provision can help small businesses owners across the state keep their prices down by covering some of their margins.
- The only reason SALT was capped was as a punitive measure meant to hurt blue states like Vermont, which utilizes it the most because they have high taxes.
Here are some FAQs:
How does the proposal work?
- Here is an example of how this might work for a taxpayer. The state tax paid by the pass-through can be deducted from the pass-through’s income at the federal level because the SALT deduction cap does not apply to businesses, only to individuals. This reduced federal tax is then passed onto the pass-through members, so they pay less federal income tax. The pass-through also passes on the state tax to its individual members. The individual members can then claim a state income tax credit for the tax paid.
Would the state lose money on this?
- The federal government will pick up the cost of this tax cut that the state legislators have within their power to create.
- The state will likely make more money on this proposal because of the elective tax liability. A filer would be eligible for credit equal to 90% of the member’s pro-rata share of tax paid by pass-through. The state could bring in as much as $5 million in additional revenue.
How much would this save eligible Vermont filers?
- It’s estimated that between 20,000 and 30,000 state filers could elect to use this and bring in a savings of about $50 million to the state by lessening what is paid in federal taxes.
Should we wait until every filer in the state can access a SALT deduction again?
- Just because this has been repeatedly stalled in Congress doesn’t mean we should pass up meaningful tax relief for those who have a path available.
- To wait would be to needlessly continue sending Vermont dollars to Washington just because we want the perfect solution instead of a good one for the time being. If we can save $50-250 million now, we should.
Congress will likely do this for everyone, so why don’t we just wait for that?
- People have been saying this for years, however, it is clear Congress won’t get this done, we need to do what we can ourselves.
- Because the SALT cap affects blue states, and because of the partisan nature of Congress, this usually can’t make it to the final round of negotiations in most packages.
This sounds like a handout to the rich?
- No, any business owner making as little as $25,000 can make use of this.
- See this overview from the State Joint Fiscal Office showing the filers impacted.
Act 250 Legislation Consolidated and Passed Out of Committee
The House Committee on Natural Resources, Fish, and Wildlife voted out their latest version of S.234 this week after some big changes were made in hopes of creating a version everyone can get behind. The Committee removed the road rule, which would have created a new jurisdictional trigger, thereby a veto, and kept the forest fragmentation language which only adds new criteria. The Committee also removed the consequential sewer and wastewater connection language, exempting projects that receive a wastewater connection permit from a municipality needing an ANR permit. This likely would have been some of the most impactful language in terms of facilitating the development of new housing.
Finally, the Committee voted to add their own bill H.492, which made changes to the governance and appeals, and they have already sent to the Senate. The Senate Committee on Natural Resources and Energy is considering the bill more favorably despite broad grassroots disapproval from the development community and mayors.
The Revenue and Budget Picture
This week, we were back to the days of dueling press conferences, with the Governor using his standing Tuesday presser to outline his discontent with the Senate-passed budget, followed by a response by the Senate Pro Tem and Chair of Senate Appropriations. The Senate passed its version of the budget, which is on its way to the House. The House already decided not to concur with the Senate version and appointed Representatives Hooper, Jessup, and Fagan to serve on a Committee of Conference.
There is a lot to negotiate between the Senate Finance and House Ways and Means Committee before adjournment as they are far apart on S.53 (corporate tax), H.510 (child tax credit and other tax relief), and now potentially the yield bill.
The Senate Finance Committee voted out H.510 unanimously along similar lines to what we covered last week. The Committee increased the state’s level matches the Federal Child and Dependent Care Credit to 100%. The $10,000 child tax credit would cost the state $22 million and phased out for filers by $125 per every $10,000 of income after $55,000 of AGI.
The Finance Committee still needs to finish work on the yield bill. H.740, sent to them by the House, which they have not had much time to work on given their massive workload. There could be trouble brewing, as the House funded the Universal School Meals bill, S.100, with $29-36 million in surplus education fund revenue in that bill, as well as speaking for the other $95 million in education fund surplus in ways that most of the building has been built around. Now there is a movement from some members of the Senate Education committee to spend that money remediating PCBs in schools.
- Here are links to our past advocacy updates from this legislative session: Week 1, Week 2, Week 3, Week 4, Week 5, Week 6, Week 7, Week 8, Week 9, Week 10, Week 11, Week 12, Week 13, and Week 14.
- The Vermont seasonally-adjusted unemployment rate declined to 2.7 percent in March. In March, the comparable United States rate was 3.6 percent, highlighting just how contracted the labor market is in Vermont and why it is essential that we recruit more workers to the state.
- The Clean Heat Standard passed out of Senate Natural Resources last Friday, as predicted in this update. The final language of the bill does not create a check-back with the legislature as the Governor requested; however, the work the PUC creates will be a “rule,” which means it will need to go before the Legislative Committee on Administrative Rules once the PUC has completed their process. If you have a stake (spoiler alert – everyone does) in the outcome of this bill, you might want to watch the final discussion of this bill.
- Governor Phil Scott used his weekly press conference this week to further vocalize his displeasure with the pension proposal, predominantly around a preferred change to offer new state employees the option of a defined contribution plan instead of just a defined benefit plan. Read relevant testimony here. This has been a long time point from his Administration, yet it has been framed as an 11th-hour request. These negotiations could prove to be an obstacle to adjournment.
- This week, Governor Scott signed the medical monitoring bill, S.113, capping off an over six-year back and forth over that policy, involving dozens of versions and multiple vetos. This bill serves as a great example that, despite years of rhetoric that groups would obstruct any advancement of an issue, eventually, a reasonable conclusion can be found.
- House Judiciary is looking to include the language from the discrimination bill H.329 in the miscellaneous judicial bill, H.729. The language considered is the only language that sets a statute of limitations of six years. Personal injury damages currently hold a three-year statute of limitations, and contract damages currently have a statute of limitation of six-years.
- The Governor signed H.491, an act relating to creating the City of Essex Junction and the adoption of the City charter. When signing H.491, Governor Scott noted, “I know this issue has been the subject of debate for decades, and I’m happy to see a resolution. Congratulations to the people of Essex Junction on the establishment of Vermont’s newest city.”
- The Governor also signed H.448, allowing the City of Burlington to potentially assess a carbon impact fee on new construction. When signing H.448, Governor noted, “Although I’m concerned by the potential cost impacts this could have for Burlingtonians, I’m signing the bill because any new policy that could result from it will need to be brought back to Burlington residents for their final say.”
- In the last few weeks of the session, revenue proposals can disappear and reappear, so if you have not voiced your concern about a tax on internet services, please do so. You can find more information in last week’s update.
Concerned or need to learn more about anything in this newsletter? Email our team at [email protected].
We look forward to working with you.
The Lake Champlain Chamber Advocacy Team
Help us seek economic opportunity for all Vermonters. Support our advocacy work.
Become a member of the Lake Champlain Chamber or connect with our advocacy team to learn more about sponsorship opportunities