Governor Scott Vetoes Property Tax Bill that Includes Cloud Tax

Gov. Phil Scott vetoed the annual property tax bill, which include the “Cloud Tax,” which adds Vermont’s 6% sales and use tax to Software-as-a-Service offerings used in Vermont.

Commonly knows as the “yield bill,” the bill sets average statewide education property tax rate at 13.8%. Vermont legislators are likely to attempt to override the Governor’s veto when they gather for a veto review session June 17.

The cloud tax was added as a new funding stream to reduce the overall property tax increase. If implemented the tax is expected to raise up to $15 million from Vermont businesses and consumers from a wide range of SaaS applications.

Here is an excerpt of an article about the Veto from VTDigger

Gov. Phil Scott vetoed the annual property tax bill, setting up a veto session showdown on a piece of legislation that must pass for schools to be funded as normal. 

“We must provide property tax relief now. This can’t wait for another study before implementing cost containment strategies,” Scott said in a statement. 

Known as the “yield bill,” the annual property tax legislation helps set education tax rates statewide. As passed by the Legislature, the bill would raise the average education property tax bill by 13.8%, with actual local rates varying widely. 

The tax increase, driven by surging school costs, defined this year’s legislative session. Now, lawmakers must determine whether to try to override Scott’s veto, or forge a new path, perhaps in collaboration with his administration. 

Speaker of the House Rep. Jill Krowinski, D-Burlington, expressed her disappointment with the veto in a statement Thursday afternoon. 

“The Governor has been unable to provide any alternative plan that would be workable for the start of the fiscal year on July 1,” she said. “If we do not have a yield bill on July 1, our education system is projected to face a $93 million … budget deficit.”

In the House, the yield bill passed 93-44. It passed the Senate 18-8. 

Those numbers indicate a tight override margin, with two-thirds of each chamber needed to circumvent the governor. 

At his weekly press conference Thursday, Scott said he planned to meet with House and Senate leadership next week to discuss possible compromises on the bill. He has thus far been tight lipped about the specifics of his proposals. 

His ideas would likely look like past plans, specifically the administration’s idea presented by Tax Commissioner Craig Bolio to defer the property tax increase across multiple years by using money from elsewhere in state government. 

That idea drew disapproval from Mike Pieciak, the state treasurer, who feared it would negatively impact Vermont’s bond rating. 

“A lot of things that Commissioner Bolio had spoken about and testified to are part of this plan,” Scott said, “but there’s been a few changes.” 

At the Thursday press event, the governor was adamant that it was not worth even contemplating what would happen if no version of the yield bill passed.

“We’ll come to some agreement before that happens,” he said. “I just don’t think that that should be a consideration.”

What happens without a yield bill?

The yield bill sets property taxes at the rate needed to fund school budgets and other education costs. 

Without a yield bill, the nonhomestead property tax rate — the rate paid by landlords, businesses and second home owners — is set at $1.59, about 20 cents more than the nonhomestead rate set in this year’s property tax legislation. 

Nonhomestead taxpayers, then, would be in for a much larger tax increase than expected. 

The homestead yield, the number used to set tax rates for homeowners, would revert to last year’s figure, as would the metric for people who pay based on income. As a result, homeowners would experience much lower taxes than they’re currently expecting.

This year’s yield bill also included other revenues in the form of a short term rental tax and a tax on software accessed over the internet, together projected to raise about $27 million. Without those revenues, property taxes will go up. 

The combination of lower-than-expected homestead taxes and vanishing alternative revenue streams together would result in the $93 million funding gap the state would face without a yield bill. 

Some of that deficit could come from the education fund’s stabilization reserve. But projected to have about $52 million, the reserve couldn’t cover the entire hole.

News & Events

Red Leaf Software and Trade Network Unite to Advance Barter Exchange Technology

Read More

Sonnax: The Best Tech Secret in Bellows Falls, Vermont

Read More
Exterior view of OnLogic building with "Whale Tales" sculpture in the foreground

OnLogic Opens New Global Headquarters

Read More
Aerial view of UVM looking toward Lake Champlain

UVM Rise Summit

Read More
Vied of Hula's outdoor patio with lake in the background

Education + AI Summit

Read More