EDC to Study Local Option Tax

2/22/21 Special Meeting

by Irene Wrenner

March 8, 2021

Weeks before this month’s vote on merger with its tax repercussions, Town staff encouraged the Economic Development Commission to study a Local Option Tax: how it might be implemented and spent, and what effects, if any, might there be on local businesses.

Five staff members attended a special meeting of the EDC, held on February 22nd.

Selectboard Chair Elaine Haney attended and expressed eagerness to generate revenue in ways other than property tax.

The conventional wisdom is that a LOT would be at least partly funded by non-residents of Essex, helping to reduce the tax burden on property owners.

Town Manager Evan Teich cautioned that if the LOT were assessed on meals, rooms and alcohol, its proceeds would vary with the health of the economy and not be a predictable source of revenue. Therefore, LOT revenue might best be used for capital expenses, rather than the General Fund Budget items.

The State of Vermont will not identify the revenues generated by the LOT as being from the TOV vs TIV, and it will keep 31% as its processing fee. Town Manager Evan Teich noted that the State of Illinois takes a 2% cut.

A memo from staff, dated Feb. 17th, suggested the EDC survey Essex businesses to determine how a LOT might impact them.

LOTmtg.png

Businesses outside of Essex should also be surveyed, suggested interim Community Development Director Owiso Makuku, to see how the LOT has affected their business, if at all.

In addition to surveying businesses, a task force made up of two EDC members and staff will begin to meet non-publicly.

Comments from the public  noted that a LOT is a regressive tax. It hits low-income earners harder because it is a larger percentage of their incomes. 

A question arose as to whether cell phones, cable and online purchases would be subject to the 1% additional tax. Staff agreed to look into it.

We are only in the study phase, stressed Annie Cooper, EDC Chair. Public outreach would occur at a later date.