This section is designed to answer some common, overarching questions about Vermont taxes, such as:
Why We Collect Taxes
In the words of Benjamin Franklin, "… in this world, nothing can be said to be certain, except death and taxes." One thing to keep in mind, however, is that we enjoy many services that are funded by the collection of taxes. Roads, schools, parks, hospitals, and government services are examples of tax-funded infrastructure and benefits we enjoy.
State governments are funded in part by federal monies, but most of the rest of the states' operating monies come from taxes. The Vermont legislature has the task of raising money, including levying taxes, which results in services being provided for the common good of the people and resources of the state. The foundation of legal authority for taxation in Vermont is Chapter I, Article 9, of the Vermont Constitution as follows:
... every member of society hath a right to be protected in the enjoyment of life, liberty, and property, and therefore is bound to contribute the member's proportion towards the expense of that protection, and yield personal service, when necessary, or an equivalent thereto, but no part of any person's property can be justly taken, or applied to public uses, without the person's own consent, or that of the Representative Body, nor can any person who is conscientiously scrupulous of bearing arms, be justly compelled thereto, if such person will pay such equivalent; nor are the people bound by any law but such as they have in like manner assented to, for their common good: and previous to any law being made to raise a tax, the purpose for which it is to be raised ought to appear evident to the Legislature to be of more service to community than the money would be if not collected.
The Vermont legislature delegates the administration of many, but not all, of the taxes collected for the state to the commissioner of the Vermont Department of Taxes under Vermont law at § 3201. In the administration of taxes within the commissioner's jurisdiction, the commissioner may adopt, amend, and enforce reasonable rules, orders, and regulations in administering the taxes.
Types of Taxes Collected
The Vermont Department of Taxes collects a number of different tax types, such as personal income, corporate and business income, sales and use, meals and rooms, and property tax, to name just a few of the major taxes. Much of the total tax collected by the Department is deposited into the State’s General Fund, but some taxes are directed to the Education Fund, Transportation Fund, and special funds that have been established to support specific projects or to provide assistance to Vermonters.
Here are few examples of how your tax dollars are distributed:
- Personal Income Tax goes to the General Fund
- Corporate Income Tax goes to the General Fund
- Sales and Use Tax goes to the Education Fund
- Meals and Rooms Tax goes to the General Fund (69%), Education Fund (25%), and Clean Water Fund (6%)
- Local Option Tax goes to the assessing municipality (70%), the State’s Payment in Lieu of Taxes (PILOT) Fund (30%), minus a $5.96 per return fee, set in Statute.
- Education Property Tax goes to the Education Fund
- Aviation Jet Fuel Tax goes to the Transportation Fund
- Fuel Tax goes to the Home Weatherization Fund and Petroleum Clean Up Fund
- Health Care Claims Tax goes to the Health Care Resource Fund
- Tobacco, E-cigarette, and Cigarette (Stamp Tax) Taxes goes to the General fund, Education Fund, and Health Care Resource Fund
- Property Transfer Tax goes to the General Fund (33%), Municipal and Regional Planning Fund (17%), Housing and Conservation Trust Fund (50%), Current Use Administration Fund (2%)
- Property Transfer Tax Surcharge goes to the Clean Water Fund
- Hazardous Waste Tax goes to the Environmental Contingency Fund
- Cannabis Excise Tax goes to the General Fund. However, thirty percent (30%) of the revenues raised by the Cannabis Excise Tax, not to exceed $10,000,000.00 per fiscal year, are used to fund substance misuse prevention programming.
Where Your Tax Dollars Go
Personal income, corporate and business taxes, and meals and rooms taxes make up the bulk of tax revenue deposited into the General Fund, according to the State of Vermont's Annual Comprehensive Financial Report for the Fiscal Year (ACFR) issued by the Vermont Department of Finance and Management. Revenues that are not required by law to be deposited into a specified fund or to be directed to a specific purpose are deposited into the General Fund.
Much of the General Fund, the report says, is paid out to the following major governmental functional categories: General Government, Protection to Persons and Property, Human Services, Labor, General Education, Natural Resources, Commerce and Community Development, and Transportation. The majority of the General Fund’s remaining resources are transferred to other funds and used for other purposes. For more detailed information, see the complete ACFR report.