Montpelier, Vermont — During National Small Business Week, Americans for Prosperity (AFP) is raising concerns about the increasingly difficult environment facing small businesses across Vermont, as lawmakers in Montpelier continue advancing policies that threaten affordability, growth, and opportunity.
Despite already ranking among the least competitive tax environments in the country, proposals to raise taxes on small businesses and workers continue to pile up. According to data from the Tax Foundation, Vermont ranks 42nd overall and 38th for business tax climate in its 2026 State Tax Competitiveness Index, placing it in the bottom tier nationwide.
AFP Northeast Region Director Ross Connolly said:
“Small businesses are the backbone of Vermont’s economy, playing a critical role in employment, local investment, and long‑term economic stability. Unfortunately, they are under mounting pressure due to a growing wave of taxes and mandates coming out of the State House. Instead of making it easier to start, grow, and sustain a business, policymakers are making it more expensive, forcing some businesses to scale back or shut their doors entirely.
“Vermont’s small businesses are already operating on thin margins. Adding on higher income taxes and new fees sends a clear message that the state is not open for business. This will lead to less investment, fewer jobs, and fewer opportunities. During National Small Business Week, we urge lawmakers to change course and prioritize policies that make Vermont more competitive, not less.”
Income Tax Increases
- H.794 would impose new surtaxes of up to 6% on higher earners, pushing Vermont’s top income tax rate as high as 16.75%—the highest in the nation—and directly impacting pass-through small businesses. The bill also creates a new “Wealth Proceeds Tax” on investment income.
- H.621 adds new tax brackets that would raise the top income tax rate to the highest level in the country beginning in 2026.
- H.732 introduces additional surtaxes of up to 2% on upper-income filers, further increasing the burden on small business owners.
Sales and Gas Tax Hikes
- H.863 would require retailers to collect a 30-cent delivery fee on most goods and allow municipalities to impose new fuel taxes—raising costs for both businesses and consumers.
- S.286 adds a 2% surtax on meals, rooms, and alcohol, hitting key sectors like hospitality and tourism.
Wealth Tax Proposal
- H.620 creates a commission to study a broad-based wealth tax, including the potential to tax assets, investments, and even unrealized gains—policies that have proven economically disruptive in other states.