Public Assets Institute > Policy Areas > Education > Legislature’s solution to high property taxes? Raise property taxes

Legislature’s solution to high property taxes? Raise property taxes

Desperate to find a way to reduce property taxes, the Legislature’s latest idea is to increase property taxes in scores of communities. Huh?

Seriously. The plan is to impose property tax penalties on districts with per-pupil spending that is higher than the Legislature thinks it should be. Each school district will have its own assigned spending threshold per pupil, and voters will pay a tax penalty if their district exceeds the threshold.

According to data from the Agency of Education, about 150 school districts would have to keep their per-pupil spending growth under the rate of inflation in fiscal 2017 in order to avoid additional tax penalties. In other words, more than half of the school districts in the state would face an extra property tax hike if their spending per pupil just kept pace with normal cost-of-living increases.

The thresholds are determined by the ratio of each district’s per-pupil spending to the district in the state with the highest per pupil spending. Then the entire formula is adjusted to an overall growth limit that the Legislature deems appropriate.

It is not at all clear why per-pupil spending in Weybridge—the district with the highest projected spending per pupil for next year—should determine the level of spending appropriate in Elmore—or Burlington or Norton or Brattleboro. But that is how the proposed formula will work.

The Legislature has short-changed the Education Fund in the past and shifted a bigger share of the cost of education onto the property tax. But lawmakers not only seem determined to duck responsibility for that shift, they are proposing to move even more of the education funding responsibility onto property taxes.

The motivation of many in the State House seems to have been expressed by Rep. Scott Beck, R-St. Johnsbury. He offered a funding reform plan a few weeks ago with this important advantage: “The Legislature would no longer be the body that gets blamed for high education property tax rates.”

The Legislature also appears to overlook the fact that the current system already has tax consequences based on per-pupil spending: tax rates go up with higher education spending per pupil and go down with lower per-pupil spending. Although we don’t typically use terms like “penalties” and “incentives,” the system in effect now offers incentives to towns to keep their per-pupil spending below average and imposes penalties on those with above-average spending.

According to Agency of Education data, average education spending per pupil is about $14,000 this year. A district that now spends $1,500 per pupil more has about a 16-cent tax “penalty.” That is, the district tax rate is about 16 cents higher than a district with average per pupil spending.

Local school boards and local voters already have an incentive to reduce their spending: it reduces their taxes. So if voters are choosing to spend more than the average and pay the penalty, perhaps it’s because they believe that’s what’s needed to avoid undermining their children’s education. Slapping them with harsher tax penalties seems an odd way to lower property taxes.

As a practical matter, this latest plan would do little more than add yet another layer of complication to Vermont’s education funding system. In its simplest form, the current system sends adequate price signals: the more you spend per pupil, the higher your tax rate. But various tweaks and adjustments added over the years have only served to obscure the price signals.

In the mad rush to adjournment, the Legislature could do more for their constituents if they focused on simplifying the funding system for school district voters by clearing away clutter they’ve piled on over the years—or at least refrain from adding this new clutter.

Posted by Jack Hoffman on May 15, 2015 at 3:34 pm

One Response to “Legislature’s solution to high property taxes? Raise property taxes”

  1. Alison Anand says:

    A few days ago, a representative told me of a concern that the education fund has been tapped to help compensate for deficit in the general fund. This means that the property taxes which are supposed to be for education are not entirely being used for education. This seems a subversive way to raise taxes and gives the general public an inaccurate impression of the rising costs of education. Are we going to put the mismanagement of adults onto the backs of children?