Lawmakers irked by sales tax opposition

House speaker against extending 2008 sunset on levy

By Tom Gresham
Observer staff

Local legislators expressed frustration at roadblocks during the recent legislative session to firming up the local option taxes, pointing to rivalries among towns and a staunch opponent in a leadership post.

Sen. Ginny Lyons, who represents Chittenden County, and Rep. Mary Peterson, one of Williston’s two representatives, said the debate on sales and rooms and meals taxes was often contentious during the recent session and the lack of results maddening.

Both the House of Representatives and the Senate approved separate provisions that would have kept the local option taxes in Williston beyond 2008, when municipalities authorized to use the levies lose that authority. Williston has a 1 percent sales tax and a 1 percent rooms and meals tax that intended to fund infrastructure needs connected with commercial development.

The House provision would have extended the sunset on the local option taxes beyond 2008, while the Senate provision would have extended the right to levy local option taxes to every municipality in the state.

However, Senate and House negotiators could not agree on a compromise, according to House Speaker Gaye Symington, D-Jericho. “We agreed to put things off until next year,” she said.
Peterson and Lyons, both Democrats, pointed to Symington’s opposition as an obstacle to expanding the local option taxes to more municipalities and allowing Williston to continue to use the taxes.

“I can’t underestimate how passionately opposed to the local option tax the speaker is,” Peterson said.

The stakes for Williston taxpayers are huge. The sales and rooms and meals taxes have allowed the town to reduce the property tax rate by roughly 27 cents per $100 in valuation. That equates to $540 in annual property tax savings for the owner of a $200,000 house.

Symington questions whether local option taxes have been fair. She said residents from other towns pay the tax when they shop, but they do not share the same benefits Williston residents enjoy.

She said representatives of some of the state’s smaller towns wonder whether their constituents are well served by the tax. Smaller municipalities with smaller commercial bases would not benefit from the tax and would therefore not be interested in gaining the option of using it.

“The local option taxes are paid by all Vermonters, but the bulk of the revenue only goes to the particular towns with the taxes,” Symington said. “I understand the towns have infrastructure needs, because they are centers of business, but I don’t think there’s been enough work to see who’s paying the bill and who’s benefiting from it. I’m not willing to just go ahead without looking at what the impact on taxpayers in smaller towns is.”

Symington has agreed to convene a study group to take a closer look at local option taxes. The group will meet in the fall or next January.
Peterson said she has encountered several legislators who believe a greater cut of the local option taxes should be distributed to the state. She called the suggestion “ludicrous.” She said most states allow local option taxes and ask for a much smaller cut of the revenue than Vermont does, if they ask for any at all. The 30 percent of local option taxes that are sent to the state government in Vermont is already “unprecedented,” Peterson said.

Resentment at Williston’s low property tax rate is behind some legislators’ opposition to the town continuing to have the tax, Lyons said. The town had a municipal property tax rate of 8 cents this year. Without the local option tax, the rate would have been around 35 cents.

“One of the basic problems for us is that the towns around us who don’t have the tax and want it use us as an example, so people get mad at us,” Lyons said.

Peterson said the discussion of the issue in the House of Representatives has been distinctively parochial.

“In instances like this, I don’t think folks are really being fair to Williston,” Peterson said. “They aren’t looking at the other side of the ledger and the amount of economic activity produced for the state here.”

Although the local option tax would not sunset until the end of 2008, Town Manager Rick McGuire said that is not distant for purposes of municipal planning. For instance, a town charter change that institutes a new funding source could take two years.

Peterson advocates starting a task force in Williston that would study the local option taxes and possible alternatives to them.