This is the text of an op-ed piece Montpelier Mayor Mary Hooper published in support of the proposed local options taxes for Montpelier. It is reposted with her permission.
The Chamber of Commerce and Business Association have done an excellent job of presenting a case against local options taxes. They worry about how this will affect our business community. The chamber suggests that because we can collect money more efficiently from property taxes, that is how we should pay for services.
Montpelier’s residential community deeply values our downtown and commercial partners. We have worried about our locally owned retailers and small entrepreneurial businesses. We support them by shopping locally and by investing property tax dollars in the downtown.
We make these investments because they make us a stronger, more vital community. We need to keep investing in our community, but we have stretched our property tax payers too far.
We have not heard about the burden our residents are facing.
Many in our community live on small fixed incomes; many are state employees who have seen 3% and 5% reductions in their pay over the past three years. All face the same rising costs of health insurance and energy.
We have not heard of the slow shift of paying for services to the residential sector. Twenty-five years ago, residents paid for about half of the cost of services. Today they pay for two thirds of these services.
We have not heard about who consumes Montpelier services. Montpelier has more employees per capita than any community except Williston. This distinction is part of what makes our community so vital-20,000 people coming into town each day. And it is what makes our taxes so high-as we pay for the services they use.
Nor have we heard a clear explanation of who pays local options taxes. Rooms, meals and alcohol taxes are easy to understand-the people who rent a room, buy a meal or a drink will pay the additional 1%.
Sales taxes are more complex. There are lots of exemptions. Most food and clothing, farm equipment, residential heating fuel, vehicles, items bought for re-sale and many other items are exempt from the sales tax.
Specific data on sources of sales tax is not collected by the state. But one of our large businesses pays $175,000 annually in sales tax. Extrapolating from this it is safe to assume that the major employers pay at least half of the sales tax. This is the same commercial sector which draws people into the town and which has seen it’s share of property taxes rise at a slower rate than residential property tax payers.
We do know that less than half of the sales taxes paid in Montpelier will come from the people who shop locally. We do know that as the charter changes are proposed the local options taxes will reduce property taxes on the average residential property in Montpelier by about $150, in addition to investing an additional $100,000 in the business sector. And that if Montpelier passes local options taxes the average residential property tax payer would have to spend more than $15,000 to offset this tax savings.
We should not allow this conversation about local options taxes to devolve into a business versus resident debate. I hope we will carefully consider how we support the needs all of this community. How do we fairly share the responsibility of providing services to all in our community?
Last time this was up for a vote in Montpelier, the Downtown Workers Union, UE 221, was organized throughout the city. The union, which I was a member of, opposed the tax as regressive and against the interest of local employees. It will be interesting to see what happens this time, now that the union is not their.
Property taxes themselves. Taxing people on the value of their real estate worked well 150 years ago. Most people farmed, and those who didn’t put their money into productive real estate or their own houses. Real estate was a bellwether for income. Also, income was harder to track – no W-2 forms in the 19th century.
Of course, today it is the exact opposite. We have very few farmers and most people invest their money (if they have it) in paper investment vehicles – stocks, bonds, mutual funds. Income is much easier to track.
Property tax is like taxing people on their Body Mass Index, because rich people can afford to eat more. Hey, it would have worked in the 18th century.
Montpelier is doubly hosed because it is a hub town and full of non-taxable government buildings. The PILOT funding is always inadequate. I grew up in Middlebury, which had the same hub problem and Middlebury College as its non-profit gap in the grand list.
Property tax became too stupid to survive about 75 years ago, but has persisted out of inertia and the very fact that it is regressive. A millionaire can set his own tax rate by the size of his house. Even with a big house a wealthy person can maintain a favorable income/tax rate differential.
I’m with Dave on a local income tax. Either that or a separate state income tax that gets returned to local schools on a dollars per student basis.
The imp in me thinks about a return to the medieval concept of a property tax – on ALL property, not just real estate. The Lexus, the stock portfolio, and the jewelry all go into the grand list. I can hear the screams already.
I have no issue voting for raising my own taxes. Judging by the results of all the various referendum over the years (“Shall the City give $5000 to Cause Of The Day” “SURE!!!”), neither do most of my neighbors. I do have an issue with raising sales taxes and creating/modifying other local option taxes. Right now we have a fairly high occupancy rate in our downtown area (and the ones that are vacant all seem to be mostly due to landlord drama). Meanwhile, the downtown in Barre City is suffering. Yes, a lot of the reason Montpelier’s downtown is doing so well is that we have a captive audience. You can only go so far on a 30 minute lunch break. However, the margins that the businesses make is fairly small. No one is getting rich selling sandwiches and soft drinks. I don’t think an economic downturn/slow recovery is the right time to be trying to squeeze more money downtown.
I think what’s happened here is we’ve voted ourselves into far too many obligations. We have two choices in my mind. Broaden the tax base or reevaluate some of our spending. There isn’t much in the way of developable land left in the City, and as we lack a standing army to conquer East Montpelier, Middlesex, Moretown, or Berlin, we’re left looking for creative solutions. The solution currently on the ballot I don’t believe to be the right one. I’m probably voting no on Tuesday. I hope we can have a discussion about alternate solutions, be it spending adjustments or bonding to support whatever infrastructure spending is needed.