As the Senate Finance committee considers a proposal to include professional services under the sales tax, Gov. Peter Shumlin says he'll strongly oppose the effort.
The lawmakers' plan would also reduce the sales tax rate.
Sen. Finance chairman Tim Ashe wants lawmakers to consider making a major change in the Vermont sales tax.
Ashe is concerned that revenues from the sales tax are stagnant because Vermont's economy is shifting from a consumption-based model to a service-based system.
Ashe wants to expand the base of the sales tax to include many professional services. If this is done, he says it will also be possible to reduce the current 6 percent rate.
"It's an important public policy choice whether we want to continue to rely on a sales tax to fund a good portion of general fund operations with a base that isn't going anywhere,” Ashe says.
Gov. Shumlin doesn't like the plan at all. He says changes to the Vermont sales tax almost always benefit businesses in New Hampshire.
"Every time we do, it's a huge gift to the state of New Hampshire,” Shumlin said in an interview on Vermont Edition Friday. “I've got nothing against New Hampshire, but I don't particularly want to drive their economic development. We've watched our retail cross over the river to New Hampshire, and they're booming on the other side of the river. And it's really hurting our downtowns in Vermont on the eastern side."
And Shumlin is convinced that the proposal will lead to higher spending by state government.
“My fear of that proposal is that first of all, they'll expand it, and then the next time they need revenue they'll say, ‘Look, it's only three-and-a-half percent now, but we could raise it to four-and-a-half percent and solve all these problems.’ And then five-and-a-half percent and then you'll be back at six. So I'm not enthusiastic about it.”
The Senate Finance committee is hoping to have a draft plan ready before the Legislature adjourns next month.