9-21-16 – More on Expanding the Sales Tax to Services

by Rob Roper

As Sue Minter, the Democratic nominee for governor, announced it would be her goal to expand the state sales tax on services and the issue has heated up on the campaign trail, perhaps a little history is in order.

This idea formally surfaced in 2011 after the Blue Ribbon Tax Commission (BRTC), a three member panel appointed by Governor Jim Douglas, then Senate President Pro Tem Peter Shumlin, and Speaker of the House Shap Smith, submitted a report to the legislature on overall tax reform. These recommendations had to be revenue neutral – no tax increases, no tax cuts. One of them was to expand the state sales and use tax to include 168 services, such as child care, automotive repair, landscaping, etc., as well as goods.

The broadened tax base would be used to lower the overall rate from 6% to somewhere between 4.5% and 5% after exemptions were applied to healthcare, education, and business to business services.

Speaker of the House Smith liked the idea so much he appointed a special House committee to look into expanding the sales tax during summer and fall of 2012, and even went on the record saying he wanted to make it a pillar issue in the 2012 elections. However, after the group Vermonters First ran a television ad explaining what expanding the sales tax meant to various businesses, the political support scattered like cockroaches when the lights come on, and Smith temporarily backed off.

The idea didn’t die there, though. More recently the lead booster of expanding the sales tax has been Senator Tim Ashe (D/P-Chittenden), chair of the Senate Finance Committee. In 2015, Ashe offered a formal proposal for expanding the sales tax to services that would have lowered the overall rate to 4.75%. Ashe, however, did not see this as a revenue neutral proposal, but a way to “grow what has been a declining source of revenue for the state.”

And, when Shap Smith announced his plans to run for lieutenant governor, VPR reported in just May of this year, “Smith says he also wants to pursue sales-tax reforms that could bring down rates, and stabilize revenues, by expanding the sales tax to include a growing services-based economy.”

The main reason this plan has not moved forward despite such high-powered support in the House and Senate is the fact that as Governor, Peter Shumlin has opposed the expansion of the sales tax. When asked why, he noted wryly at one point, “I can see New Hampshire from my house.”

If Minter wins the race to replace Shumlin in the corner office, that check and balance will be gone and the path for expanding the sales tax to services will be open.

Rob Roper is president of the Ethan Allen Institute

{ 4 comments… read them below or add one }

H. Brooke Paige September 22, 2016 at 5:29 am

If Sue Minter is elected governor count on a new tax on services and no reduction in the 6% rate for goods and now services. Her new big ideas will need every dime of revenue and MORE !

Phil Scott is Vermont’s last best hope for keeping Vermont from careening over the financial cliff ! If you don’t get out and vote, you are part of the problem !

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Frank Bammo September 22, 2016 at 12:33 pm

Given the current governor and legislatures inability to “forecast” revenue, it would seem that the sales tax rate would climb back to 6 (and 7) percent within several years.
What historically has happened is this:
A- We Vermonters go to NH to buy things.
B- We do more for cash (under the table)
C- We stop spending
There is a simple solution: Stop the increases in state spending.

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Jim Bulmer September 24, 2016 at 12:36 pm

If and that’s a BIG if, Ms. Minter gets elected and gets her service tax at a reduced rate, BEWARE! It won’t be long before some idiot in the legislature comes up wth a frivolous plan that needs nonexistent funds, and guess what? Up goes the sales tax!!! Simple solution- elect Phil Scott and bring fiscal sanity back to Vermont!!!

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William Hays September 25, 2016 at 5:45 pm

Sue Minter is, by far, the scariest politician Vermont has ever had! Ayup! Sales taxes on EVERYTHING, with the exception of feminine hygiene products (which I will go along with). Guess the Hippies/Yuppies, who never get haircuts, will vote for her Communist a**.

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