The debate over whether a 1% local option tax would protect taxpayers or burden local businesses was the focus of a July 28 Warren Select Board meeting. The select board is considering joining other Vermont towns, including Waitsfield, in implementing a local option tax on retail sales, meals, alcoholic beverages, and rooms.
Board members pointed out that they have not decided whether to place the question before voters. Supporters argued the tax would shift much of the cost of maintaining roads, bridges and other municipal infrastructure to visitors, while opponents warned it could discourage spending and add to Vermont's tax burden.
Josh Schwartz, executive director of the Mad River Valley Planning District, presented an analysis prepared for Warren after conducting similar work for Waitsfield, where voters approved it by a two-to-one margin on Town Meeting Day last March. It became effective July 1.
REVENUE PROJECTIONS
Schwartz said municipalities retain 75% of the revenue collected, while the remaining 25% supports the state's Payment in Lieu of Taxes program. Using state tax data from 2021 through 2024, Schwartz estimated Warren would have generated about $416,305 in 2024 from in-person taxable sales. Factoring in online purchases, he estimated annual revenue could approach $500,000.
Retail sales account for about 68% of Warren's taxable activity, followed by rooms, meals and alcohol. Based on the planning district's methodology, about 26% of the tax would be paid by residents and 74% by nonresidents. Schwartz also estimated that generating the same revenue through property taxes would cost the owner of a $450,000 home about $282 annually, compared with an estimated $178 annual impact from the local option tax.
Schwartz said local option taxes have become increasingly attractive after legislative changes in 2024 eliminated the need for legislative approval and Act 57 increased the municipal share of revenue from 70% to 75%. Those changes helped increase the number of Vermont municipalities with local option taxes from 38 to 50 in about a year, he said. Communities also are looking for new revenue sources as infrastructure costs rise and federal funding becomes less predictable, he explained.
BOARD DISCUSSION
Select Board Chair Devin Klein Corrigan said the board's goal was to determine whether the tax is an appropriate tool for Warren and, if so, how any revenue should be used.
"We're having this conversation because we want to hear from our residents," Corrigan said, explaining the board is looking for alternatives to continually raising property taxes to pay for projects such as the town garage, roads and bridges.
Town resident Chris Behn pressed officials on several aspects of the proposal, asking how Waitsfield reached its decision, whether all four taxable categories were included, how the proposal reached voters and whether projections showing visitors would pay most of the tax could ultimately be verified.
Chach Curtis, a member of the Waitsfield Select Board, said voters approved the tax after about a year of public outreach and informational meetings. Waitsfield chose to tax all four categories because most Vermont municipalities that initially taxed only some categories later expanded the tax to all of them. Schwartz acknowledged no municipality can determine precisely how much is paid by residents versus visitors, describing the figures as planning estimates based on available data.
WAITSFIELD EXPERIENCE
Curtis said Waitsfield's Select Board focused on using the revenue to address aging infrastructure, including roads, bridges and municipal buildings.
"Our roads are falling apart, and our bridges are closed, and the town garage has a leak in the roof," Curtis said, adding that many local businesses supported the tax because functioning infrastructure benefits both residents and visitors.
He said Waitsfield officials were also concerned about the effect on residents living on fixed incomes. Although the planning district estimated an average household impact of about $180 annually, Curtis said actual costs would vary significantly because necessities such as groceries, heating fuel and clothing are exempt.
BUSINESS CONCERNS
Town resident Tim Seniff, who works in the restaurant industry, argued another 1% tax would further hurt restaurants already struggling with rising costs and changing consumer habits.
He said previous increases in meals and alcohol taxes reduced food and beverage sales, with customers ordering less or choosing to eat and drink elsewhere. Another tax increase, he said, could make it even harder for restaurants in The Valley to survive.
Resident Camilla Behn questioned which businesses would be affected by the retail portion of the tax and whether Warren could tax only meals, alcohol and lodging without including retail sales, which Schwartz said represents the largest share of potential revenue.
Resident Perry Bigelow took the opposite view, saying the town will have to pay for infrastructure one way or another and that a local option tax would allow visitors to help cover costs.
"If it's paying for stuff that we've got to pay for anyway," he said, "then let's get the folks who benefit from the town to help pay for it.”
NEXT STEPS
In terms of what’s next Corrigan said the board has no firm timeline. Although officials once discussed placing the question before voters this November, that option is no longer under consideration. If the board chooses to move forward, the earliest the proposal could appear on a ballot would be Town Meeting Day. Another option would be waiting until the following year to review Waitsfield's first full year of experience under the tax before making a decision.
