Public Assets Institute > Policy Areas > Vermont Taxes > A solution needs a defined problem

A solution needs a defined problem

There wasn’t a lot of substance in this election season. “Where’s the beef?” isn’t a question we hear much during campaigns anymore, as Jon Margolis lamented in his column in vtdigger this week. But while candidates may not need to offer thoughtful, workable proposals or even clearly define problems to get elected, they will need to do both after Election Day if they want to improve life in Vermont.

One issue in need of definition is the school property tax “problem.” We’ve heard calls for school consolidation, school closings, property tax freezes, an education spending regulatory board, student vouchers, and shifting reliance from property taxes to an income-based tax. What we haven’t heard, though, is a clear explanation of the problem these solutions are intended to fix.

Some people seem alarmed at recent increases in the base property tax rate set by the Legislature. But property values have been dropping in the state. So taxes have actually risen more slowly lately than they did several years ago when the base rate was dropping and property values were increasing.

When people talk about the property tax problem, are they looking at rates? Total property tax collections? Diminishing support from the General Fund? Changes in the average school tax bill? And what time period are they talking about? It’s not at all clear.

A recent Burlington Free Press story reported that a 67-year-old man on disability needed to sell his home in part because his property taxes had gone up to $4,000. But the story made no mention of income sensitivity, which allows Vermonters to pay school taxes based on income if their household income is less than $90,000. Town records show what the man’s property tax would have been, but income sensitivity adjustments are confidential, so we don’t know his final bill. Did property taxes drive this individual from his home? Who knows?

During the last legislative session, we heard two narratives. One suggested that school taxes should be more painful. The claim was that Vermonters who pay school taxes based on their income don’t really feel the full effect of budget increases, and therefore they vote up school spending. In fact, income-based tax rates rise just as property tax rates do when districts vote higher education spending per pupil. But the claim persists that many Vermonters are shielded from the consequences of higher spending.

The second narrative was just the opposite: Vermonters are getting hammered by rising property taxes.

Which is it?

There were similar mixed messages about school consolidation last session. Early on, proponents were clear that they didn’t expect school consolidation to save money. Nevertheless, they said students would benefit if they were moved out of small schools with limited curriculums. By the end of the session, cost savings led the sales pitch.

There are changes that could improve Vermont’s education funding system. The system, overall, is still regressive: the typical Vermont household making $250,000 a year pays a smaller share of its income to support public education than the average household with $60,000 in income. Having all resident homeowners pay school taxes based on their income would reduce that disparity and reduce some confusion related to the property tax.

If 2015 really is the year the Legislature looks seriously at property taxes, they need to start with a clear definition of the problem so Vermonters can assess whether proposed solutions might actually solve it.

Otherwise, we’ll find out the hard way that Lewis Carroll was right: “If you don’t know where you’re going, any road will get you there.”

Updated at 2:00 p.m. on 11/5/14 

Posted by Jack Hoffman on November 4, 2014 at 3:35 pm

4 Responses to “A solution needs a defined problem”

  1. David Usher says:

    The problem is really simple. Vermont spends far too many dollars on education. Taxation under any formula is a secondary effect of overspending. The problem to be solved is the spending problem, pure and simple.

    The Legislature must act to constrain spending and destroy the politically convenient myth of local control and work on the taxation mechanism.

  2. You say the education funding system is still regressive, but the numbers you give to support this statement do not support it; rather the opposite. Did you leave out the percentage of their income each income level pays (which is what could support your statement)? Please clarify.

    And, David Usher says the problem is we spend far too much on education, but gives no supporting evidence or even argument for that. We get one of the very best education systems in the nation for what we spend, according to the results. That is worth a great deal, so it looks to me like we don’t spend too much on it. And the voters of Vermont take the opportunity every year to decide how much to spend on it, and while we complain about the education taxes, we keep voting for the budgets, so our voters in every town don’t think we spend too much. We have a democratic system for controlling education spending; it’s called the annual budget vote. The Legislature should not meddle to constrain education spending. The Legislature could usefully look at real methods to support good education and reduce costs.

  3. Jack Hoffman says:

    Thanks for your comments. When you say Vermont spends far too many dollars, do you mean for the state overall or per pupil? There have been suggestions that Vermont look for ways to fill some of the empty seats in schools. But adding students to lower per-pupil cost won’t help if the problem is total spending.

    By what gauge do you conclude that Vermont is spending too much? If it’s total spending that is too high, is it too high in proportion to Vermonters’ incomes? Total government spending? The economy? If it’s per-pupil spending that is too high, is it too high compared to other states? Which state is spending the right amount? How do we determine how much is the right amount to spend?

    I welcome your thoughts.


  4. Gene Podhurst says:

    The problem does, of course, need to be better defined. AND …so too does what we mean by income based education taxes and who, if anyone, is actually “shielded” from the consequences of higher school spending. Surely if a household makes $250,000 – or even half that – it is better able to afford increases in education spending than a household making $60,000. Especially when the lower income household may have property that has disproportionately increased in value over decades and perhaps generations. Isn’t the more important issue what it takes to legislate a school tax system which is PROGRESSIVELY levied and based (primarily) on income and (secondarily)derived from properties with 2nd homes without VT income? Dropping all the “shields” seems like it could go a long way toward defining both problems and solutions.