New Mandates and Taxes Proposals, Committees Start Discussions

The pace of action in Montpelier started to pick up in February, with lawmakers introducing hundreds of new bills and committees starting discussions on some of the major issues facing the state. Governor Phil Scott also continued his push to roll back expensive energy mandates, reform school funding, and (hopefully) rein in property tax increases.

State lawmakers will take a break during the first week of March for Town Meeting Week before resuming action ahead of important dates: the policy bill crossover deadline on March 14 and non-major finance bill crossover deadline on March 21. The budget bill and other major finance bills come later.

Not surprisingly, a number of progressive energy, tax and labor bills have been proposed – with some even taking their first steps in committee. While there are some proposals that would give Main Street a break, action has been slow to come on making life and business more affordable in the Green Mountain State.

Here are some of the bills that NFIB VT is watching right now (click the links to view the bill text and a full list of sponsors).

If you have questions or feedback on any of the proposals, please don’t hesitate to reach out to NFIB VT State Director John Reynolds at john.reynolds@nfib.org or 802-992-0751.

Taxes/Fees

No Credit Card Fees on Sales Tax or Tips (H.317, Casey): This bill would save small businesses money on credit card processing fees by prohibiting processors from assessing a fee on the portion of a transaction attributable to sales and use tax or gratuities. NFIB VT supports this bill.

Building Materials & Supplies Sales Tax Exemption (H.308, Bartley): In order to encourage more construction in Vermont, provides an exemption from sales and use tax for the purchase of building materials amounting to $1 million or more in a three year period. NFIB VT supports this exemption

Education Income Tax (H.177, Rep. Bram Kleppner): Part of the larger school funding/property tax problem in Vermont, this proposal has been kicking around for a few years.

H.177 would eliminate homestead property taxes but keep property taxes on nonhomestead parcels – including agricultural, commercial, and industrial – and add a new income tax that would roughly double income tax rates in the state.

It’s an especially bad deal for the small pass-through businesses that make up the overwhelming majority of businesses in Vermont as they would face double taxation on their income while still paying significant property tax bills. Vermont small businesses already pay relatively high property tax bills, according to a recent 50-state study.

H.177 also further separates local school funding from local revenue sources, which may exacerbate the problem of spending decisions being disconnected from revenue sources.

This proposal received a brief introductory hearing in the House Ways & Means Committee on February 21. The sponsor suggested the education income tax rates would be much lower than the doubling proposed in the bill, but did not offer specific rates.

Retail Delivery Fee (S.75, Sen. Rebecca White): Adds a 30-cent retail delivery fee to fund various vehicle electrification programs, including e-bike rebates. Despite the regressivity and complicated nature of administering the fee, this has become a popular blue state funding mechanism in recent years under the guise of making Amazon pay its fair share for using public roads for deliveries.

In other states that have adopted a similar fee, it’s been an administrative nuisance for small business owners and yet another tax/fee that adds to the cost of doing business.

12.75% Top Income Tax Rate (H.77, Rep. Kate McCann): Enacts a new income tax tier of 12.75% on married single filer income over $600,000, single filers over $1,000,000, and married joint filers over $1.2 million. This would be the second highest top income tax rate in the country, behind only California.

Energy

Clean Heat Act Implementation/Heat Taxes (H.216 & H.224, Rep. Michael Mrowicki): Despite the ten-year price tag of $1 billion and the VT PUC find the Clean Heat Standard would deliver just 50 cents of value on every $1 spent, H.216 would forge ahead with implementation of the Clean Heat Act.

The tax would be capped at 10 cents per gallon for the first five years but would almost certainly rise thereafter. The VT PUC pegged the tax at 60 cents per gallon by year ten, while other estimates pegged it at $1.70 per gallon.

H.224 would authorize an unspecified new per gallon tax on heating fuel. Both bills will make life more expensive for small business owners and hardworking consumers.

Making it worse, it’s unlikely that either bill would solve the politically-made problem of meeting the greenhouse gas reduction targets in the 2020 Global Warming Solutions Act, which turned enforcement power over to lawyers and judges via taxpayer-funded special interest lawsuits.

As a result, the tax in H.216 or H.224 would be just the start. Lawmakers would likely still need additional fees and taxes on Vermonters to fund programs aimed at meeting the GWSA targets, or courts will do it for them.

Clean Heat Act Repeal (S.67, Sen. Terry Williams, H.16, Rep. Jim Harrison): These bills would totally repeal the Clean Heat Act and its dormant $1 Billion Heat Tax. NFIB VT supports repeal.

Republicans in the Vermont Senate attempted to take this bill up on the Senate Floor in late February, but the motion to bring the bill up for debate failed on a party line vote. Its future remains uncertain.

California Cars/Trucks Rules Repeal (S.101, Sen. Scott Beck & H.65, Rep. Mark Higley): repeals the authority for Vermont to follow California’s expensive and restrictive vehicle emissions mandates: LEV, ZEV, and Advanced Clean Trucks. The rules include mandating that all new vehicles sold be 100% zero emission starting in 2035. NFIB VT supports repeal.

Global Warming Solutions Act Repeal/Modification: numerous bills would repeal the 2020 Global Warming Solutions Act or modify it into goals that are not enforceable by taxpayer-funded private lawsuits. NFIB VT supports modifying the GWSA mandates to goals and eliminating taxpayer-funded enforcement lawsuits.

Labor Mandates

Minimum Wage & Overtime Pay Hikes: (S.67, Sen. Alison Clarkson): This would increase the statewide minimum wage to $18.60 per hour starting on January 1, 2026. H.347 (Rep. Kate Logan) goes even further, taking the minimum wage to $20 per hour, eliminating the tip credit, lowering the OT threshold for agricultural workers to 40 hours by 2036, and requiring time and a half overtime pay for most salaried workers who earn less than $58,656 per year.

Recent analysis of minimum wage laws by the Federal Reserve show government-mandated wage hikes like this will have a devastating impact on the retail, restaurant, and lodging sectors. Workers will ultimately see fewer job opportunities, fewer hours, and lower average earnings.

32-Hour Workweek (H.261, Rep. Monique Priestley): In the face of chronic worker shortages and small businesses struggling to find help to keep their doors open, this bill would set the standard workweek at 32 hours. After that, the employee is entitled to time and a half for overtime.

With two job openings for every unemployed person in the state right now, and small business owners continuing to struggle with worker scarcity and higher labor costs, this bill would make life even harder on Main Street.

Right to Disconnect (H.263, Rep. Monique Priestley): Creates a right for an employee to ignore communications from their employer outside of normal working hours. It establishes limited exceptions for emergencies such as: threats to the business, its customers, or other employees; disruption or shut down of operations; and the potential for physical or environmental damage. The bill establishes a minimum penalty of $100.

This bill impedes the ability for employers to communicate important changes and updates outside of normal work hours, among other issues. The exceptions are ambiguous would surely be challenged if enacted.

Payout of Unused Vacation Time (H.295, Rep. William Greer): This would require an employer to pay out unused vacation time in the employee’s final paycheck following separation. This has become a popular proposal in New England recently but is still very uncommon across the country: fewer than 10 states require mandatory payout of unused vacation regardless of circumstances on separation.

It’s an expensive proposition for small employers who allow employees to carry over of unused vacation time from one year to another, and the likely response will be to restrict carry over and limit the amount of leave hours an employee can accrue. Unfortunately, the bill has quite a bit of bipartisan support despite the potential negative implications.

Unemployment Insurance for Striking Workers (H.338, Rep. Kate Logan): Allows striking workers to collect unemployment insurance benefits, which puts the thumb on the scale of workers in labor disputes and will raise UI costs for employers.

Good Cause Termination Restrictions (H.344, Rep. Kate Logan): Makes it difficult to discharge employees by redefining the meaning of “good cause” to prohibit terminaton of employment for reasons that are trivial, arbitrary, capricious, or otherwise unrelated to a legitimate business reason. Per the proposal, a “legitimate business reason” includes the employee’s failure to satisfactorily perform job duties. An impossibly vague standard that will expose employers to endless litigation.

Unpaid Time Off Expansion (H.33, Rep. Troy Headrick): This bill broadens the definition of family member for Vermont’s existing 12-week unpaid time off law in ways that will be unfamiliar to many Vermont employers.

Most notably, the “significant personal bond” category of family has the potential to divide workplaces and pit employees against employers. This section forbids an employer from requiring evidence to verify the existence of such a relationship. It is unclear how an employer or the state would ensure this category is used appropriately.

It also establishes new categories of leave that expand allowable uses within the existing 12-week allowance (bereavement, qualifying exigency) and doubles the annual per employee leave allowance from 12 weeks to 24 weeks (safe leave).