Businesses say new tax structure will have impact

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(Host) The new compromise Act 60 reform plan creates a two-tiered property tax system: one variable rate for residents and a second fixed rate for all businesses.

VPR’s Bob Kinzel examines how the new plan will affect the state’s business community.

(Kinzel) Under the compromise, residents will pay a rate of $1.10 to finance a new higher block grant of roughly $6,800. This residential rate will be increased if a community decides to spend above the block grant amount. If the town elects to spend 10% above the block grant, then their tax rate will go up by 10%.

The current average residential rate in Vermont is $1.72. Under this plan, the average rate will drop to $1.35 – a reduction of just over 20%. The current business rate is also $1.72 and it will drop to a fixed rate of $1.59 under this proposal. Local businesses will not see an increase if education spending goes up in their community.

House Ways and Means Chairman Dick Marron (R-Stowe) says this plan makes it possible to eliminate the sharing pool of Act 60. It’s a very controversial provision that forces residents in property wealthy towns to share some of the money they raise locally. Not all sharing has been done away with. Marron points out that towns will be sending their non-residential tax revenue to the state:

(Marron) “Of course there’s a big pool of money that is going to come in from the statewide property tax on non-residential property, including second homes. And that’s splitting the grand list was the real key to make this work.”

(Kinzel) The impact on a specific business will depend largely on the spending decisions of their communities. Businesses in high spending towns will see a tax cut. Montpelier is such a community.

Currently the town’s tax rate for education is $1.89. Under the new plan the rate will drop to $1.59. Don Bigglestone, who owns Capital Stationers – an office supply store on Main Street – thinks the new law is going to help his business:

(Bigglestone) “It gives us all a level playing field. We can all start off on the same footing. And the competition that I have in different towns around, we’re all starting at the same amount. And it would be good for all of us.”

(Kinzel) Seven miles away from the capital in the city of Barre, the new proposal will have a different impact of businesses. Barre’s education rate is currently $1.42. Businesses in that community will see a tax increase of roughly 10% as their rate is raised to the fixed rate of $1.59.

Mike Thurston, an owner of Exile on Main Street – a music and electronics store – thinks it’s important to fund education, but he admits that the new plan will make it tougher to turn a profit:

(Thurston) “Every time you increase the burden on a retailer in the central Vermont area, you make him a little less competitive with those other places that I mentioned- Chittenden County and border towns in New Hampshire and that sort of thing.”

(Kinzel) The proposal also raises the sales tax from 5% to 6% this October. The main provisions of the law will not go into effect until July of 2004.

For Vermont Public Radio, I’m Bob Kinzel in Montpelier.

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