Public Assets Institute > Policy Areas > Vermont Taxes > Everyone loves the property tax

Everyone loves the property tax

For all of their public hand-wringing over property taxes, legislators and even the governor seem almost cavalier in their willingness to ask property owners to pay more.

  • The tax incentives proffered by Act 46 to induce school districts to merge are being funded by higher property taxes.
  • The Legislature imposed property tax penalties last year in an effort to reduce property taxes.
  • In January, the governor declared property taxes “one of the biggest contributors” to what he called Vermont’s “crisis of affordability.” He then made a proposal that would have shifted $50 million in additional costs onto the property tax.
  • The House Education Committee introduced a plan earlier this session that would have increased school property taxes on high-tax towns in order to lower taxes on low-tax towns.
  • Now the Senate Appropriations Committee wants to load more costs onto the property tax. In order to balance the state’s General Fund, the committee decided to shift an $8 million appropriation into the Education Fund. So $8 million that would have been covered with income taxes or the sales tax would have to be picked up by property owners.

Given the public rhetoric around property taxes, this proposal ought to provoke a lot of head scratching, if not head banging. But this is another consequence of leaders in Montpelier painting themselves into a corner by pledging a balanced budget with no new taxes before they’ve even had a chance to determine what needs to be done for the people of the state in the coming year.

The governor proposed some worthy initiatives in his budget, like putting more money into providing affordable, high-quality child care. More money for child care was also one the items the Senate Appropriations Committee wants to fund next year.

But while it appears everyone knows the state should be making more investments in people and programs, no one seems to want to have an open discussion about the best way to pay for those investments. Instead, the solution is: move it to the Education Fund. That way, the governor and the Legislature can avoid raising taxes directly. It will be property taxes that go up, but that can be blamed on school spending, teachers, and local school boards.

Despite what we often hear about Vermont’s “skyrocketing” or “out of control” school costs, Vermont school spending has consumed the same share of state and local taxes for at least 20 years. And for the last 15 years or more, the share of General Fund revenue going to support general education has remained pretty constant. It was 33.2 percent in fiscal 2003, and it’s 33.5 percent this year. During that period, it hit a high of 35 percent early in the recession, and thanks to federal stimulus money, it hit a low of 30.2 percent.

There are better ways to generate the money that leaders in Montpelier appear to agree is needed. Instead of increasing property taxes, which fall more heavily on low and moderate income Vermonters, we could close some of the tax loopholes enjoyed by those who aren’t having an affordability crisis. Wouldn’t that at least be a better place to start?

Posted by Jack Hoffman on April 25, 2017 at 4:29 pm

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