Legislators want to expand local option tax across Vermont
By Patrick McArdle
STAFF WRITER | February 19,2013
BENNINGTON — The county’s two state senators say they are working on a bill that would allow every municipality in the state the chance to add a 1 percent tax to retail sales, meals and alcohol or hotel rooms.
Sen. Richard Sears, D-Bennington, said he had supported the local option tax when it was created in response to the state’s education formula in 1999 and he thought it should be available to towns like Bennington.
“Now it’s been almost 15 years and it’s time, in my mind, to expand the ability to have the local option tax to all communities. The reason I say that is a town like Bennington, which has to provide the infrastructure for the surrounding towns, including New York state, has expenses that some of the smaller towns don’t have. This would help defray some of those costs and also lower tax rates,” he said.
Sears’ colleague, Sen. Robert Hartwell, D-Bennington, said he supported expanding the tax opportunity throughout Vermont as well.
The local option tax was created for towns like Manchester which were considered “sending towns,” or “gold towns,” under Act 60. Manchester was one of a number of towns that was sending more in property tax to the state than it was getting back from the state for its own school.
The local option tax was intended to help recover some of that money in the hope that it would be used for property tax relief. The 1 percent tax can be applied to retail sales, hotel rooms or the meals and alcohol sold at restaurants. It can be applied to all three categories or any combination of them.
Burlington and Rutland collect similar taxes on meals, entertainment and lodging because that authority has been written into their city charters. Among the towns that take advantage of the state program are Bratttleboro, Rutland Town and the ski resort towns of Killington, Stowe and Stratton.
Last month, the Select Board in Bennington, at the request of Town Manager Stuart Hurd, acted by consensus to show their support for allowing other towns to enact the tax.
“In our particular case, we are told that in Bennington here, it would generate about $1.63 million annually that could be used for capital projects, which would reduce the budget on an annual basis while we continue to try and do over $1 million worth of work. ... It would have the benefit of allowing us to build perhaps a capital reserve perhaps for those instances where we don’t have sufficient funds to do a particular project and it needs to be done,” Hurd said.
Board members supported the idea although one, Jason Morrissey, said he would prefer the Select Board use the money directly for property tax relief and not spend the money on other projects.
The board’s actions do not mean that if the law is changed the taxes will be imposed in Bennington. Under current law, local option tax can only be proposed by the town’s governing body but they can’t be enacted unless residents vote to support them.
The local option taxes are collected by the state and 70 percent are returned to the town. The rest is used for the payment in lieu of taxes, or PILOT, program which pays towns for hosting state buildings because the towns can’t collect property taxes from them.
Sears pointed out that because Bennington hosts the state office building and the Bennington Battle Monument, among other state properties, it could benefit both from the local option tax directly and an increase in PILOT payments.