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Advocacy Update – Week 14 – 2026

Lake Champlain Chamber News and Press Advocacy Update Legislative Updates Advocacy Update – Week 14 – 2026

Thank you to this week’s sponsor of our Advocacy Update:

April 17, 2026

The week the watched pot boiled, with monumental movement on two defining issues of the past decade: education costs and land-use reform. As we discussed previously, what is notable about action around these two issues is that it involves heavily amending recently passed legislation. 

  • Education revolves around Act 73, passed just last year, with much of the discussion focused on how to delay some elements, implement others, and intense debate over whether school consolidation was the way to contain education costs. This week, the House voted on its answer to these questions. 
  • Housing and land-use reform has focused on extending positive elements of Act 181, passed two years ago over the Governor’s veto, and whether to delay or repeal the highly unpopular road rule and tier 3. This week, the decision was made to repeal those components – there isn’t much more to report this week. 

While both issues saw monumental movement this week, there is so much more left in this ballgame.  

Political calculus: this biennium has been marked by the notable loss of the Democratic Party’s supermajority, precipitated, many would say, by a spike in property taxes and a backlash to the Clean Heat Standard. 

  • Deja vu? As we get closer to what is already looking like a very competitive election cycle, rank-and-file members are feeling anxious about another election in which they are being beaten up on educational cost contagion and a far-reaching environmental policy. 

Moving pieces around the board: we’re in the final stretch, though the session will take at least until the end of May, and each side is trying to stack up their endgame. 

  • The Speaker likened the land use overhaul to the school consolidation effort backed by Scott, saying; 
    • This is not dissimilar to our work this year as we update our approach to education transformation. We heard from Vermonters that Act 73 was happening too quickly, and more time for community conversations was needed. We listened, and that request is reflected in H.955 – this year’s education transformation bill.
  • Phil-osophical pickle? The Governor doesn’t necessarily see it that way…

With friends like these… Just as the Democratic leadership charts a path, the left flank is pulling them back into danger with a proposed higher top income tax bracket and a “VIP Tax” on business, rental, and investment income over $200,000. 

High-Level Takeaways

Evergreen lesson: There are lag times to the implementation of policy, and for years now, lawmakers have attempted to use those lag times to put more distance between them and the policy that will be unpopular. 

  • Look at H.740, a bill aimed at attempting to create a fuel registry to account for fuel usage and emissions to satisfy the Global Warming Solutions Act. While legislators and advocates have not pursued additional climate policy this session, the GWSA is quietly waiting to be triggered in the background, and the Clean Heat Standard, though closed, still lies dormant in statute, to be triggered in the future if the state does not meet emissions targets.

Regionalization> State Control: Democrats and many Republicans seem more comfortable at this time with moving to regionalization before accepting “top down” government change, with a comfort with this session seeing a new regional governance structure created for education, a new regional policing bill likely to pass, and a county and regional governance study committee being revitalized. 

We unpack the top seven things you should know about the education transformation bill, the new taxes the legislature is looking to levy, and much more in our laundry list. 

If you have any questions and want to go deeper on any of these issues, please reach out to us….

This Monday – LCC Legislative Breakfast at The Nine!

Every year, we bring legislators, policymakers, and LCC members together to celebrate business ownership and entrepreneurship and advocate for economic opportunity for our region. Sponsored by EastRise Credit Union, our Legislative Breakfasts are opportunities to connect with legislators and those in higher office.

  • When: Rescheduled to April 20th! 
  • Where: The Nine | 1205 Airport Parkway, South Burlington

Thank you to our hosts, The Nine and Dealer.com, for their generous support of our Legislative Breakfast Series!

Register Here
Thank you to our breakfast sponsor

Education Transformation Bill Passes the House 

The House passed H.955 for the first of two votes Thursday evening. The vote notably signals a switch from a rather nonpartisan policy area last session to a sharply partisan one this session, as it fell along party lines. 

Here are seven things you should know about the bill. 

  1. One year after Act 73 passed, the monumental education transformation law designed to achieve scale, predictability, and cost containment in Vermont’s education system has been relitigated by the House to avoid forced consolidation and delay major aspects of the law set to take effect. 
  2. Two-Year Foundation Formula Delay: The implementation of the new funding formula, which shifts budget-setting authority to the state, was delayed from 2028 to July 1, 2030. This delay is contingent on several factors, including the completion of merger studies and a JFO analysis of funding impacts
  3. Three Tax Classifications: The bill defines three property tax classes: homestead, nonhomestead nonresidential, and the very new nonhomestead residential, which targets second homes. 
    • Second homes will be taxed at different rates than primary homesteads to generate revenue that will then make income sensitivity for property taxes more generous. 
  4. Four-ty percent over the last five years, a property tax trend that has become a central focus for both voters and legislators during the 2026 session. Meanwhile, the state’s student population has plummeted from over 110,000 decades ago to fewer than 80,000 today.
    • The “Alligator Mouth” Problem: This describes a structural gap where education fund costs grow at roughly 6% annually, while the non-property tax revenues that support the fund (such as sales and use taxes) only grow at about 3%.
  5. Fifty million dollars in bonding capacity for school construction : It revitalizes the State Aid for School Construction Program by proposing $50 million in bonding capacity and a debt service subsidy model. This is meant to serve as a consolidation carrot, as aid priority is given to projects that support regionalization and consolidation.
  6. Six-Year Reassessment with Regional Assessment Districts (RADs): Starting January 1, 2031, RADs are established to ensure all municipalities within a district are treated as a single entity for grand list equalization. 
  7. Seven Cooperative Educational Service Areas (CESAs): The bill replaces the existing voluntary regional collaboration model (BOCES) with seven mandatory CESAs.
    1. Mandatory Membership: Every supervisory union in the state is explicitly assigned to a CESA with no statutory mechanism for withdrawal.
    2. Role as Service Providers: CESAs are designed as distinct entities with their own boards and budgets, but do not override local supervisory union governance.
    3. Core Services: Each CESA must provide at least three services: special education (high-cost/low-incidence), business and administrative services, and consultation for creating unified school districts. They may also offer shared transportation and professional development

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Lawmakers Consider Vermont’s Proposed Investment Proceeds Tax (VIP) and the Highest Top Marginal Rate in America 

The House Committee on Ways and Means is working on a proposal that represents a two-pronged approach to targeting high earners and business owners.

  • Vermont Investment Proceeds Tax (VIP tax): for a 4% surtax on investment income, modeled after the federal Net Investment Income Tax (NIIT), but going beyond that (outlined below). 
  • Highest Marginal Brackets in the U.S.: The bill proposes a new top income tax bracket of 13.3% for earnings over ~$587,000, which would tie Vermont with California, though California’s starts at $1.5 million.

Rewind: You probably recall a few weeks ago, we updated you on a floor amendment and a deal made by leadership to not vote on the issue on the floor, promising committee hearings and a vote. 

The VIP Tax Unwrapped

The “VIP Tax” is designed as a targeted surtax on “unearned” income. It doesn’t replace existing income taxes; it stacks on top of them to “level the playing field” between wages and investment gains.

How it works: The tax applies only if you meet two conditions:

  1. “High” Income: Your Modified Adjusted Gross Income (MAGI) exceeds $200k (individual) or $250k (married).
  2. Investment Income: You have net gains from dividends, interest, rent, royalties, or capital gains.

How it sugars out: You pay 4% on the lesser of your net investment income or the amount your total income exceeds the threshold.

Going beyond: The Vermont proposal is broader than the federal version. It includes “add-backs” that could trigger taxes on:

  • Business/Farm Sales: Selling your company or land could trigger a massive one-time tax spike.
  • Out-of-State Munis: Income from non-Vermont municipal bonds.
  • Small Business Stock: Capital gains from qualified small business stock (often exempt federally).
  • Rental Income: Passive rental income is included, leading to concerns about the passed-through costs to tenants.

Notable points of friction: 

  • Targets Pass-Through Entities: The tax would apply to active business income, not just passive wealth, and would have broader effects because many Vermont businesses are structured as pass-through entities. This means higher personal income taxes would directly impact small business owners. She highlighted three primary concerns: a proposed minimum tax based on adjusted gross income could create liabilities even when businesses lack liquid cash. 
  • Retroactive: Most alarming? The proposal is retroactive to January 1, 2026. Any 2026 exits or bonuses already executed would be hit by this new rate if it passes.
  • Revenue Gamble: Vermont is betting that its “top 1%” (just 3,300 people) won’t leave the state despite a 50% increase in their top tax rate.
  • The “One-Time Spike”: A middle-class owner selling a lifelong business could be classified as “wealthy” for that single tax year, triggering the 4% hit.
  • Double Taxation: Lawmakers openly admit this is double taxation, justified by the view that investment income is currently “under-taxed” compared to labor.
  • Competitive Risk: Minnesota is currently the only other state with a similar tax. There is concern that this could make Vermont an outlier for entrepreneurs.
  • Interest income is portable: A person can make this type of income in the state of Vermont and not need to pay Vermont taxes on it if they are homesteaded elsewhere. 

What’s Next? The House Ways and Means Committee has not yet voted. They are currently “stress-testing” the bill against scenarios involving ESOPs, farms, and real estate. Expect more testimony on whether this will drive capital out of the state or effectively close “loopholes” for the wealthy.

The Bottom Line: If you earn over $250,000 from income or investments, you could be seeing a very large tax bill unless the legislature backs down. 

What you should do: Are you concerned about how this surtax might affect your plans for a future business exit or property sale? Write your legislator and express your concerns!

The Laundry List: 

  • Noncompetes legislation back in play. This week, the House General and Housing Committee is considering adding an amendment to a Senate labor bill to provide some level of a win on noncompetes at the request of members of the House Committee on Commerce and Economic Development because it stalled in that committee, due to an amendment brought forward by the NEA. The amendment would tie eligibility to the FLSA overtime pay test to assess if the employee was eligible for a noncompete agreement.  
  • Governor Phil Scott today announced his appointment of Kevin Scully of Burlington to serve out the remainder of the term for the vacant Chittenden-18 seat. The appointment has brought controversy, as Scully was not one of the names the local democratic committee put forward. Scully, a Democrat, served as Chief of the Burlington Police Department from 1986 to 1998. After his retirement, he worked as the General Manager of Ready Funeral Home and for the Catholic Diocese of Burlington. 
    • As we covered last week, there have been an unprecedented nine mid-biennium appointments with implications for the coming election, which will see many hotly contested seats. 
  • State Budgeting: The Senate is working to finalize the budget by next week, with its current version roughly $20 million over target.  FY28 will be worse due to a myriad of issues, including looming revenue losses from changes to the provider tax and declining federal Medicaid support (FMAP), combined with the expiration of one-time funds used in the current budget. This creates pressure to avoid adding ongoing (base) spending commitments now, since doing so could worsen structural deficits in the next fiscal year. The overall outlook was described as uncertain and largely negative from a financial standpoint.
  • The T-Bill has passed out of the Senate Committee on Transportation with a new mileage-based user fee (MBUF). Beginning in FY2027–FY2028, the Agency of Transportation and DMV are directed to develop and refine the program, with required reporting to the Legislature. By FY2029 and beyond, the State is expected to expand the system, with the goal of applying the MBUF to all light-duty vehicles over time, including internal combustion vehicles.
Category: Advocacy Update