Property tax overhaul proposal gets public hearing in Montpelier

Michael Bielawski/TNR

TAX REFORM: Karen Lafayette, of Burlington, a former state legislator, talks to the House Ways and Means Committee on Wednesday regarding a proposal to overhaul the education funding formula.

MONTPELIER, Vt. — Members of the House Ways and Means Committee on Wednesday heard from the public regarding a new proposal to dramatically shift the way education funding is done in Vermont.

The big pieces of the proposal include a 48 percent reduction in the homestead property tax rate, elimination of the income sensitivity program, and no more transfers of money from the state budget to the state education fund. Instead, workers and businesses would make up the difference through a new school income tax on workers, businesses, renters and investors.

Business owner David Logan has more than 200 employees and a $12 million payroll to manage for Autumn Harp in Essex Junction, a natural cosmetics company. He said he’s not thrilled to hear about a potential corporate tax increase of 24 percent.

“I believe that would put us second only to California,” he said. “We recently expanded our facility, we spent $11.5 million. If I had gotten any truth with the economic development folks that you’d be increasing our taxes by 24 percent, we would not have made that expansion. We would have invested outside Vermont.”

Logan added that he recently passed on an additional investment in the state of $1.5 million “because of the business climate.” And he reminded that neighboring states already have a great advantage when it comes to tax climate, citing a brother who owns a business in Massachusetts and pays 5.1 percent.

“So the money that goes to me as a Vermont resident, I will pay another 6 percent,” he said. “What do you think that drives me to do?”

One recurring theme among other speakers was to take it slow on the reform process.

Geo Honigford, president of the Vermont School Boards Association, said school boards will be presenting their budgets for Town Meeting Day votes in two weeks, and many people would want to know how this will impact their taxes.

“That puts us in a pretty awkward position,” he said. “So, we’re not opposed to this happening, but let’s slow it down for this year.”

Lauren Poster, of Marlboro, who was a former school board member, reiterated Honigford’s comments.

“As you are well aware, we’ve put our budgets to bed and there’s going to be Town Meeting in a couple of weeks,” she said. “I there’s a lot to dig into here and I really commend you for trying to rethink how to fund schools in the state. I also have concerns about unintended consequences and I don’t want this to be rushed.”

Karen Lafayette, of Burlington, a former state legislator, made a number of requests for the proposal.

“Having been on the Ways and Means Committee when we passed Act 60, I understand that sometimes legislation is somewhat complicated,” she said. “But I thought one of the goals of this new system would be to simplify and to have the legislation be more transparent, and that any local consequences from spending decisions would be spelled out clearly and have a direct result.

“I would hope that any plan maintains equity, and I think that is the most important component of education financing.”

She observed that the bill does not change the amount of money collected but rather shifts who pays it. She said if such a plan is enacted, a big component should be an analysis of this cost shift impact on everyday Vermonters.

Allen Gilbert, of Worcester, who served as the former executive director of the American Civil Liberties Union of Vermont, offered his thoughts on the reform proposal.

“Its goal is to move to a straight income tax for financing a state block grant, but then it turns back to the property tax for funding of the block spending. Homeowners’ income won’t matter for the second-tier tax,” he said.

“I urge you to build on the reform promise of the bill and move all residential taxpayers to a system where all school taxes are based only on income. That would create a more equitable school tax system and it might even raise more school revenue.”

Nick Ecker-Racz, of Glover, advocated that whatever changes are made, they need to be simple.

“What we had before was a nightmare — nobody understood it,” he said. “And then we had reform, and people understood it even less. If you can come up with something that is simple, that everyone can understand, then I think that would be remarkable.”

He added that there are underlying issues driving school budgets regardless of how the money is collected.

Ways and Means Chair Rep. Janet Ancel, D-Calais, indicated that her committee will try to decide the proposal’s fate by the end of this week.

Michael Bielawski is a reporter for True North Reports. Send him news tips at and follow him on Twitter @TrueNorthMikeB.

Images courtesy of Flickr/ and Michael Bielawski/TNR

8 thoughts on “Property tax overhaul proposal gets public hearing in Montpelier

  1. A little over a year ago I looked up the worst rated buessness friendly states. At that time Vermont rated 4th out of 50. Do we really want to drive more employers out like California and New York who are spending millions on TV advertising trying to get jobs to come back? It shore has been a boom for states like Texas where a lot of Cal. is moving to. Many complain our young are moving out to get good jobs and I don’t blame them. Take a ride up to the north east part of the state and check out the houses and how many buessness you see then cross the river into NH. and do the same. The difference is obvious.

  2. Here in southern Vermont 2 high schools near have 40% fewer students than 20 or so years ago.
    Nobody wants to close any schools.

    on the left side of the above link

    Additional Information

    HW&M Public Hearing Education Funding Materials

    1. Reduce the average homestead education property tax rate in FY2019 from $1.554 to $0.820 by:
    a. Lowering the base homestead property tax rate to $0.25
    b. Providing a base spending amount of $12,253 per equalized pupil
    c. Raising the homestead property yield to $5,600 (on above-base spending only) Homestead tax rates increase faster than under current law for every $1 of additional above-base spending per-pupil

    2. Maintain the nonresidential property tax rate at its current-law amount – $1.591

    3. Simplify administration and compliance with the education tax system by:
    a. Replacing the property tax adjustment and income yield with a school income tax (see item 4)

    b. Replacing the homeowner rebate on the education property tax with a homeowner exemption (see item 5)
    c. Replacing the homeowner rebate on the municipal property tax (see item 6)

    4. Create a marginal school tax on adjusted gross income (AGI):
    a. Tax brackets, tax rates, and AGI cap:
    AGI Bracket Tax Rate
    $0 to $47,000 Exempt
    $47,001 to $125,000 1.20%
    $125,000 to $4,000,000 1.65%
    Over $4,000,000 Capped
    b. Resident renters and nonresidents with Vermont AGI would be subject to the AGI tax
    c. AGI is the measure of income closest to household income available
    d. AGI tax may be collected through wage withholding (no penalty for underwitholding in CY2018)

    5. Assist low-income homeowners with their education property bills by:
    a. Providing a variable housesite exemption for homeowners with household income under $47,000:
    Household Income Bracket Housesite Value Exemption

    $0 to $10,000 Exemption 93%
    $10,001 to $20,000 Exemption 82%
    $20,001 to $30,000 Exemption 61%
    $30,000 to $40,000 Exemption 40%
    $40,000 to $47,000 Exemption 22%

    b. Limiting the housesite exemption to the first $400,000 of housesite value
    c. Applying the tax value of the education property tax exemption directly to education property tax bills
    Unlike under current law, all homeowners would have a stake in the growth of their school budget

    6. Create a municipal property tax rebate program:
    Tax brackets, tax limits based on household income, and cap:
    Household Income Bracket
    $0 to $10,000 1.20%
    $10,001 to $24,999 3.15%
    $25,000 to $47,000 3.50%

    The above I copied from the state website. There is more I didn’t copy.

    If somebody owns a house and makes $15,000 and the house is worth less than $400,000 they get an 82% exemption.

    House is worth $200,000, they make $15,000 and pay the school property tax portion of the new plan on 18% of the value of the house which would be $36,000 and they get taxed for schools like the property is worth only $36,000
    If the tax rate is 82 cents a hundred the school tax would be $295
    And they would pay $277 towards town services.
    Total tax $572

    The 82 cent amount will vary because of per pupil spending in the town.

    Another example
    Somebody has household income of $35,000 and a $300,000 house
    40% of the house value is exempt so they pay taxes on $180,000 at 82 cents per hundred it’s $1476 in school tax.
    The town services tax could be as high as $785.
    Total $2261

    As property values drop in most of the state the tax burden gets shifted to the more prosperous I-89 corridor and away from rural parts of the state. The urban people running the state can’t have that so they change the system that is currently making some peoples taxes go up and others are going down.

  3. Vermont ‘s property tax , so if your a home owner and have worked your entire life for a better
    life , well that’s when the Government steps in and makes you pay , if your retired you pay again
    on your earnings …………….to fund liberal programs !!

    They don’t have a fair tax for everyone, nope punish the home owner , to support a inflated schools
    budgets being pushed by the NEA for greedy salaries ….But wait it’s for the Kids what a crock !!

    All the renters, students and free loaders ( Government TIT ) just pay a measly sales tax on retail
    items ……..

  4. Towns can overcome any tax reduction proposal by Montpelier by bogus property assessments thereby maintaining their tax income level mainly for the local school system, being over 80% o tax revenues.

    I know about bogus assessments. I have property in the woods, on a dirt road. Two acres assessed at $11,000 per acre. My grievance with the town, the BCA Board said I had “Potential” views and other “Potential” features. Mind you, any “Potential” feature will NOT be achieved. If so did, property taxes will force me off my land. Also the State Appraiser backed up the BCA Board and Listers.

    There wasn’t any “Fair Market Value” assessment. I presented property sales showing property values had declined drastically. They all kept it the same. If I didn’t grieve the Listers presented a “Test Force Itemized Property Costs” increase. Thankfully the State Appraiser ignored that. If I hadn’t, my property value would have increased. This “Test Force” evaluation is a farce (maybe illegal). The VT Property Tax Dept. is behind all this, educates them and the elected lIsters goose steps to the State. I’ll grieve my taxes every two years, as provided by law.

    People should go to the Listers office and get their property “Itemized Property Costs” papers and see what you’re assessment is, maybe you’re being taxed on air. VT is the 49th worse state for taxes, NY is at the bottom at #50. I can inform many weith my knowledge and findings. There’s no mercy.

    I constantly fight my assessments.

    • Tom Writes “I’ll grieve my taxes every two years, as provided by law.”

      Why do you put yourself in this position, what is in Vermont that it WORTH that much grief? Just move to a state the appreciates your hard work and won’t look at you like a Piggy bank with a target on your back.

      Honestly, aren’t there better uses of your TIME? I’m a former resident of VT and I can tell you the best thing for my wallet and my sanity was when I packed my bags.

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