On Town Meeting Day, Vermonters Will Weigh In On 'Local Option Tax'

Feb 13, 2016

In just a couple of weeks, Vermonters across the state will gather in town halls and schools to have a voice in local government. Many of those town meeting discussions will center on taxes. In some municipalities, the focus will be on whether to adopt a local option tax as an additional source of revenue.

Residents of Barre City, Montpelier and Ludlow will cast their votes for or against a local option tax on Town Meeting Day. Vermont law allows cities and towns to adopt a 1 percent tax, called a local option tax. The tax can be levied on sales, hotel rooms, meals and alcohol.

Most of the cities and towns that have the local option tax apply it in all those areas. The exceptions are Brattleboro, Woodstock and Stowe, which only tax rooms, meals and alcohol. In addition, Burlington and Rutland City collect a separate city tax that does not go through the state. Local option tax dollars are sent to the state, along with state point-of-sale taxes. The tax department takes a 30 percent cut, then sends 70 percent of the money back to the municipality.

Montpelier is proposing a local option tax only on rooms, meals and alcohol. A local sales tax was shot down in the past, and it’s not on the table this year. North Branch Café owner Lauren Parker says she understands the idea behind the rooms, meals and alcohol tax is to target tourist dollars, but she doesn’t think the tax is fair to restaurants.

"Tourists come here ... more than other parts of the state, but not like they do to skiing towns," says Parker. "From my perspective it seemed like it was unfair." 

The state rooms and meals tax is 9 percent and the alcohol tax is 10 percent. Parker says the added 1 percent local tax would be more noticeable on those tabs, than on top of the 6 percent sales tax.

Parker has raised the issue with other Montpelier business owners, including shopkeepers, and she says they largely agreed. She’s organizing an effort to defeat the tax as it's proposed on the town meeting ballot. However she says she understands the city needs to come up with more money somehow.

"There’s no possibility that we’re going to get through the next two years without a local options tax," she says, "but our hope is it’s more fair."

Parker was distributing anti-local option tax flyers to Montpelier businesses this week.
Credit Amy Kolb Noyes / VPR

Parker says she’d like the city to consider levying a half-a-percent tax on all sales, including retail, as well as rooms, meals and alcohol. While state law specifies a local option tax must be 1 percent, Parker said Montpelier could consider a city tax like those collected in Burlington and Rutland City. And, she says she believes there’s a good chance that could be done for less money than the 30 percent the state charges. 

In Barre City and Ludlow, there hasn’t been an organized opposition to the local option tax. Ludlow Municipal Manager Frank Heald says the tax is proposed in Ludlow for sales as well as rooms, meals and alcohol. He expects it will bring in about a half-million dollars a year. However, Heald says there hasn’t been much public reaction to the proposal, so he’s not sure how it will be received.

"The reason you take things to town meeting as a ballot item is to find out how people actually feel about things like this." - Ludlow Municipal Manager Frank Heald

"Well, quite honestly, at this point we don’t know," said Heald. "The reason you take things to town meeting as a ballot item is to find out how people actually feel about things like this."

The situation is similar in Barre City, where Mayor Thom Lauzon says he’s heard little criticism of the plan, outside of disapproval from the Chamber of Commerce. The proposal in Barre City would change the city charter to allow for a local option tax on sales, rooms, meals and alcohol. While the mayor says the charter language can’t specify how the tax revenue should be spent, he’s promised Barre City will use all the proceeds to lower property taxes.

"I would sooner resign than renege on that promise," he says. "I do not renege on promises. And my promise has been, 100 percent of the proceeds will go to relieve property tax burden."

Mayor Lauzon estimates a local option tax would raise about a million dollars a year in Barre City.

Berlin officials plan to bring a local option tax proposal before voters in November. Berlin hopes to capitalize on new retailers coming to town.
Credit Amy Noyes / VPR

With a new Kohl's department store opening at the end of the month, officials in Berlin are also hoping to pass a local option tax this year. But Berlin voters won’t be weighing in on the question until Election Day, in November.