Since attaining supermajority status in Montpelier, the Democrats’ education policy can be explained as “give the government school monopoly (the VTNEA, superintendents association, etc.) whatever they want!”
This included universal “free” school meals, expanded pre-k spending and control over birth to five care, and a new pupil weighting system guaranteeing more spending on certain classes of students. This cocktail exploded in their – OUR – faces in the form of an anticipated 20 percent plus property tax increase.
Now, they are desperate to paper over this colossal political screw-up, and their plan to do so is not to spend within our means but rather to raise more taxes to feed into the education fund to “buy down” the impact on property taxes. In other words, continue to take more and more money from taxpayers to give to their political cronies, just out of different pockets, in the hopes we can be fooled into thinking we’re somehow getting a deal.
It’s not a new strategy. The Education Fund is currently fed by the property tax, 1/3 of the sales & use tax, ¼ of the meals & rooms tax, the state lottery, and a handful of other minor sources. My friend John McClaughry dubbed the public-school special interests “The Blob” after the 1950 horror movie monster that grew ever larger by subsuming – killing and destroying — everything in its path. It’s an apt description, and The Blob is on the move again!
The House Ways & Means Committee is currently debating what other new revenue sources can be thrown into the expanding path of The Blob. Here are the top candidates:
- Higher and/or expanded sales taxes. Vermont’s sales tax is currently 6 percent, with some communities adding a local option tax on top of that. It raises $607 million.
According to the Joint Fiscal Office, each 0.1 percent increase in the sales tax would raise approximately $9.3 million. Of course, this would make Vermont even less competitive with neighbors New Hampshire, which has no sales tax, and New York, which has a 4 percent sales tax. It was also pointed out that the sales tax is a regressive tax hitting lower-income people harder than those with higher incomes.
Expanding the sales tax base – the things subject to the sales tax – could squeeze as much as $271 million by including groceries, medical products, residential energy, clothing, and footwear. These things are currently exempt from the sales tax because, well, people need them to survive. Taxing them would be cruel and unusual. But, you know, if the VTNEA wants the money….
- An Excise Tax on Sweetened Beverages.
The JFO ran the numbers on taxing just “sugar-sweetened” beverages – soda, sports drinks, energy drinks, ready-to-drink teas, and coffees, etc. — at either 1 cent or 2 cents per ounce (so 12 to 24 cents per twelve-ounce can/bottle, but it also applies to syrups and powders to which water is added). This would extract an estimated $15.2 to $29.8 million from thirsty Vermonters. However, Rep. Peter Anthony (D-Barre) floated the idea of taxing ALL sweetened beverages, an idea the chair Emily Kornheiser said she could potentially get on board with, regardless of what the sweetener was. This would roughly double the take. Hey, why not? The VTNEA wants the money.
Of note, no other state has a sugar or otherwise sweetened beverage tax, although a handful of municipalities do. So, look for “Vermont will lead the way!” propaganda to come if this takes off.
- A “Cloud” Tax on Pre-Written Software Accessed Remotely.
Democrats in the legislature have been salivating about the Cloud Tax on software as a service for over a decade, and this might just be the year! (Because the VTNEA wants the money.) For the most part Vermont does not tax services (more on that in a moment). This tax, which would cost Vermonters roughly $20 million per year, would hit things like your Microsoft Office or Google Apps subscriptions, Quickbooks, Mailchimp, Toast or Square, Force, Amazon Web Services, and with cruel irony, TurboTax, so you’ll get to pay a tax to pay your taxes.
While this has implications for everybody, it will be particularly painful for small businesses that need these software services to operate competitively.
- Expanding the Sales Tax to Services.
Although a general expansion of the 6 percent sales tax on goods to include services – everything from school tuition, legal advice, hair salons, personal trainers, lawncare, etc. – was not part of the JFO presentation, it was raised by members of the committee. The JFO presenter referred them to the Rand Study done in 2023 to determine new revenue streams to fund expanded government-run pre-k. That study showed that expanding the sales tax to services at the 6 percent rate would extract $105 to $143 million, depending upon what and how many exemptions are allowed.
- Tax candy
Currently, candy is considered a grocery and is exempt from the sales tax. Taxing it at 6 percent would only raise $3.7 million, but as long as you’re stealing, you might as well do so from babies. The VTNEA wants the money!
The tragedy of all this taxing and spending – or perhaps the intent – was pointed out by Representative Scott Beck (R-St. Johnsbury). “Given how we define education spending and calculate the yield, this would be worse because you’d get all of the taxes and not get property taxes down at all.” Asked to elaborate, Beck went on, “If you pour all of this money into the system, the districts are going to spend it up because it’s cheap money. I mean, we’ve added in the last – with Wayfair [v. South Dakota sales tax SCOTUS decision] We’ve added $100 million in sales tax to the Education Fund, and look what’s happened to property taxes. The money’s cheap to the districts, and so they spend it.”
Just like The Blob monster that it is.
