New 2023 State Revenues (adding up the bill)

Excuse me, can I get some child care subsidies for upper middle class folks?    
Also a massive helping of new electric-powered heating systems?    
    Sounds great
Of course we also have to get universal school meals.    
Oh, and don't forget a side of universal fee increases!     
So what does that come out to?    
    Uh, a few hundred million more than you have in your account.
No worries, these other folks are picking up the tab for us...    

While the hypothetical conversation above highlights the approach the legislature seemed to take with spending this year, in all seriousness a historically high state budget (growing at nearly twice the rate of inflation) and a number of new landmark initiatives left us wondering how much more Vermonters can expect to pay in taxes and fees in the years to come. This is the question we set out to answer for you and boy did we find some interesting stuff!

Payroll Tax

One of only two outright new taxes in the mix this year is a payroll tax to fund the legislature's child care and early education initiative. While 3/4 of the tax will be funded by employers, employees will see a new line item on their paychecks for this revenue source (unless the employer voluntarily elects to cover 100% of the tax liability). Additionally, employees may see reductions in wage increases or consumers may see price increases to accommodate for this new expense. However, it is important to note that beneficiaries of the increased eligibility for child care subsidies (largely upper middle class) may see significantly reduced out-of-pocket costs associated with child care.

The revenue generated by this new tax is anticipated to be just under $82M in FY2025 and increase to nearly $93M in FY2026. See our write-up on the bill for more details about how these revenues would be spent.

Source: JFO Fiscal Note


Carbon Credits

While not straight forward, the Clean Heat Standard is potentially the largest spending item passed by the legislature in the 2023 session. While final costs will be determined by the Public Utilities Commission (and then confirmed by the legislature in 2025), the early estimate from the Agency of Natural Resources is that this will cost $1.2B by 2030. Assuming that this scheme does go into effect with the blessing of the 2025 legislature, and that spending projections remain consistent, this would require that credits generate $240M per year in revenue from Vermonter's oil and gas purchases between 2025 and 2030.

Granted, there are a number of assumptions built in here, but the bill itself (S.5) does not address costs beyond what is necessary for the PUC to administer the system.

Source: ANR analysis


Universal School Meals

Perhaps the largest "backdoor tax" is the Universal School Meals program which adds an estimated $29M to education spending in FY2024. Because no dedicated funding stream was identified for this program, the costs will fall to property tax rates. Starting this year, local property tax rates will be artificially inflated to accommodate for this increased budgetary expense, but you likely won't find a line item for it in your local school district budget. Instead, the state will collect the funds by lowering the statewide yield amount, which proportionately increases local tax rates. Sneaky, right? The legislature gets all the credit for solving hunger in schools but none of the fallout from increased taxes.

Source: JFO Fiscal Note


Fee Bill

The other favorite revenue source for legislators (outside of taxes) are fees, some of them are quite visible to Vermonters and some are not. This year's budget happens to hit one of the more visible ones, DMV fees, which are set to increase 20% for FY2024. This means that when you go to renew your licenses or the registration on your vehicles you will be paying 20% more than you did last year. Now, you could argue that inflation has increased the cost of administering DMV's programs, but the department itself did not request this increase and fees are supposed to be used to cover the actual cost of administration. This increase seems more like a new revenue source than covering costs.

One other thing to note on using fees as a revenue source is that they are generally flat, amounting to a regressive tax on low-income Vermonters. In FY2024 this increase is projected to be $21M.

Source: VT Digger reporting


OPR bill

Another set of fees increasing this year are the professional registration fees. Every year many professions who are licensed by the state must renew these licenses along with an application fee. Again, these fees are supposed to cover background checks and other functions that these departments provide. In FY2024 they are expected to increase $5.3M.

Source: JFO Fiscal Note


Sports Wagering

Another entirely new category of taxes is the new regulated activity of online sports betting. While the state's haul from this program is expected to be a modest $2M for FY2024, this is expected to balloon to $10.6M by FY2025.

Source: JFO Fiscal Note


Bottle Redemption Fees

Perhaps another "backdoor tax" is the bottle redemption fees. The bill adds new types of bottles subject to redemption fees as well as increasing the fees to $0.15 on certain types of bottles. While there is transparency on your purchase receipts about what you are paying for the bottle redemption system, what you might not realize is that the state will claw back many of the unredeemed funds when bottles are not returned (which is about 25%). By 2028, Vermonters can expect to be paying about $4.5M more in bottle redemption fees.

Source: JFO Fiscal Note


Mileage-Based User Fee

Similar to carbon credits, this one is a bit of a wild card. While the legislature has committed to putting a mileage-based fee in place for electric vehicles by 2026, they have not set an actual rate for such a fee. No estimates exist for this program so we won't hazard a guess, but it will be a new tax and revenue stream.

Source: JFO Fiscal Note



Program Bill  New Revenue 
Payroll Tax H.217  $             81,900,000
Carbon Credits S.5  $           240,000,000
Universal School Meals H.165  $             29,000,000
Fee bill H.494  $             21,000,000
Sports Wagering H.127  $             10,600,000
Bottle Redemption H.158  $               4,400,000
OPR bill H.305  $               5,300,000
Mileage-based user fee H.479  TBD 


If we assume that the Clean Heat Standard (CHS) does not go into effect in 2025, than Vermonters can expect to pay a minimum of $152,200,000 more annually from legislation passed this year. If we assume that the CHS does go into effect, than that number balloons to at least $392,200,000 per year.

There are 295,221 individual households who paid income taxes in 2022. If we assume that income-generating families bear the brunt of this increased tax & fee liability, families can expect to see an average increase of $516 - $1,328 in their annual expenses.

An important footnote on this analysis is that some of these programs do have financial benefits for individual households. Most notable are universal school meals and the child care subsidies which would both potentially decrease household spending for families in the right tax situation (i.e. multiple young children). On the flip side, retirees on fixed incomes are most likely to be negatively impacted by this bill as expenses will increase without the potential for incomes to follow. Also, low-income families without children will also see an outsized impact.

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