Senate committee weighs shifting local-option tax split; analysts warn of potential pilot fund shortfall

The Senate Committee on Government Operations heard fiscal analysis Tuesday on a proposal to change how Vermont's local-option tax revenue is split between municipalities and the state's pilot special fund.

Chris Rube of the Joint Fiscal Office told the committee that "state law grants towns in Vermont the authority to levy an additional 1%, tax on sales, meals and alcohol and in order rooms," and that under current statute the revenue is apportioned 70% to the levying municipality and 30% to the pilot special fund. He said the bill before the committee would move that split to 75/25; legislators in the House had considered an 80/20 allocation.

The nut of the committee briefing was financial: the Joint Fiscal Office estimated roughly $59.2 million in total local-option tax receipts in fiscal 2026 based on towns that had approved those taxes and FY24 data. After the tax department's per-return administration fee (about $5.96 per return) and the split, the office calculated the pilot fund would hold roughly $16.8 million under the current 70/30 split, about $14.0 million…