Public Assets Institute > Policy Areas > Vermont Taxes > Vermont Property Tax Ranking: Mystery Solved

Vermont Property Tax Ranking: Mystery Solved

You may have heard it said recently that Vermont has the highest property taxes in the country. The source of the information was Northern Economic Consulting, which seems to be the only organization that gives Vermont this dubious distinction. Not even the anti-tax Tax Foundation, which does three different calculations, puts Vermont at the top of the list.

Now we know how Northern Economic Consulting came up with its ranking: Director Art Woolf decided he didn’t like the numbers reported by the U.S. Census and added $150 million to Vermont’s property tax total.

Woolf told Vermont Public Radio this week:

“If you take Vermont’s total property taxes paid and we divide it by personal income and we do that for every state in the country, we get that we’re number 1.”

Not quite. Vermont only reaches the top if the state’s figures are padded.

The source of the property tax data for every state was a report put out each year by the U.S Census. The 2008 report is the latest one with both state and local property taxes collected in each state. Personal income for each state is available from the U.S. Bureau of Economic Analysis here.

You can do this at home. Per Woolf’s instructions: Take the total property taxes reported to the Census from each state and divide by the total personal income for each state. What you get, if you use the 2008 tax data and 2008 personal income data, is that Vermont ranks number 3. New Hampshire, in fact, has the highest property taxes in the country using this measure.

It was only after I asked Woolf to double check the arithmetic that he explained that he decided to inflate the Vermont number before doing his calculation. He offered a couple of explanations for why he thought the Census was wrong. I suspect he failed to take in account the fact that the Census data now recognize Vermont’s income-based property tax adjustment. The numbers the Census uses come from Vermont’s own Department of Finance and Management. Even so, if Woolf thought the Census data were wrong, why adjust only the Vermont figures? Mightn’t the other states be off, too?

But there is a more important flaw to this entire calculation—and it is one the Census bureau has warned against and we’ve written about. Dividing the total property taxes collected within the state by either the population or total personal income assumes that all of the taxes are paid by Vermont residents. They aren’t. Second homeowners from other states and Vermont businesses, including those who export many of their products, also pay property taxes. Why act as though those taxes are coming out of the pockets of Vermonters?

It’s perfectly sound policy to ask people with the wherewithal to afford second homes to help pay for our education system in exchange for sharing some of the beauty of this state. Why tell Vermonters that they’re paying the taxes for these out-of-state property owners? That’s the effect of calculating property taxes on a per capita basis or as a percentage of Vermonters’ personal income.

The tax debate in Vermont needs to start with accurate information about who’s paying what. Only then can we determine whether the costs of education, health care, and other essential services are being fairly shared.

Posted by Jack Hoffman on October 30, 2010 at 4:28 pm

13 Responses to “Vermont Property Tax Ranking: Mystery Solved”

  1. Willem Post says:

    Being No.3 is dismal in any case.
    New Hampshire, No.1, also has lots of 2nd homeowners.

    The property tax was designed so 2nd homeowners, whether living in Vermont or not, would pay part of Vermont’s school expenses.

    What is needed is an increase in the student-to-teacher ratio and a increase in the student- to-administrator ratio in public schools and more private schools where students get up to $5,000/yr from the state. The public school system needs competition.

  2. Bill Mathis says:

    Please send his to the newspapers and the blogs. This is too important and raises fundamental questions about source use and methods.

  3. susan alexander says:

    yes, it would be nice to have accurate data yet i believe the point is we are among the highest. The difference between being 1st or 3rd is moot so let’s make the discussion more about how to stabilize or better yet reduce that standing.

  4. Good ‘ol Art Woolf fudging the numbers again. This is a pattern. I remember flushing him out on a similar report (Vermont has the highest taxes!)back in 1991 when we passed the deficit reduction act. He had padded the numbers of Vermonter’s income tax (I think) to show we were the highest. Maybe he should turn the argument on its head and lament and rend his garments that Vermont does not yet have the LOWEST education system and the worst environment, etc.

  5. John Mangione says:

    Thank you for exposing this disinformation!

  6. Willem Post and Susan Alexander may have missed the last part of this piece, beginning with the paragraph that starts with
    “But there is a more important flaw to this entire calculation.” This flaw, were it to be accounted for, might very well drop Vermonter’s tax burden to the middle of the pack, as has been shown in various other studies including the annual comparative study of state by state effective tax burdens by the District of Columbia. Being number 2 or 3 versus number 1 is not the main point of this essay. In order to understand this piece, one must read the entire thing.

  7. Willem Post says:

    I did read the whole article, did not miss the point. I think the author should have made some more research and calculations.

    If Vermonters were to pay all the education costs, instead of relying on out-of-staters to help out, there would be even more of a reason to increase in the student-to-teacher ratio and a increase in the student-to-administrator ratio in public schools and having more private schools where students get up to $5,000/yr from the state. The public school system needs competition. Example: Detroit reformed due to foreign import competition.

  8. Elaine Alfano says:

    This cooking of the numbers is an egregious breach of professional ethics–one that should call into question the many so-called research studies that Art Woolf has foisted on the public and presented to the Legislature. Thank you for exposing this dishonest ploy to undermine support for public education in Vermont.

  9. schuyler jackson says:

    It is the total revenue derived for public purposes that counts – sales, energy subsidies an credits, 911,income,
    corporate, license and other fees, etc., etc. I suspect that
    VT ranks right up there!

  10. Willem,

    It appears that we are enmeshed in our own circle of interests. My main area of interest is tax policy and yours is education reform. I will not argue that public education has its faults and wouldn’t benefit from some shaking up. But that should occur anyway whether we change taxes or not. Likewise, it is not good for Art Woolf to lie about Vermont’s taxes in order to push his agenda of shifting the tax burden from the poor to the rich.

    I’ll leave it to Jack to defend his work, but as one who has done this type of research before, I know the enormity of the task that you suggest that he “should have made some more research and calculations.” To do that would require collecting the information for all 50 states, including tax expenditure budgets for each state (which in most cases don’t exist and would have to be calculated from scratch), to study the effects of homestead exemptions, tax classification, etc. In addition, if you REALLY want to study the actual burden, you would need to look at fee structures and services – for example, maybe a city or town in Texas or Colorado has a much lower property tax than one in Vermont, but they have to pay a higher fee for the use of a park or their businesses have to pay higher fees for municipal services. And then there is the interconnections with state and federal income taxes, for property taxes create deductions from federal income tax. High property and state income taxes help reduce federal income tax burdens for those who itemize. Of course, high property taxes are a real problem for the less affluent who don’t itemize, but Art Woolf could hardly care less about them anyway.

    So, pursue education reform, but let’s not defend a Woolf in sheep’s clothing.

  11. Carol Baker says:

    Willem, I don’t know where you live, but in my town, and all the towns around here, class sizes are average to large – several school districts with 20 kids in kindergarten, and 24 kids in upper classes. The teacher-student ratio is not of out whack. What I believe you are referring to is the STAFF- student ratio. The extra staff in question are SPECIAL education staff. When all of these adults are included in the calculation, you see that we do have many adults in the schools, and they are very expensive. They are also a required MANDATE by Federal law.

  12. Willem Post says:

    Vermont has one of the lowest student-to-teacher ratios and a low student-staff ratio.
    You can easily look it up by googling.

    There are many reasons why this is so and many reasons (budget deficits, stagnating household incomes?) why these ratios should be adjusted.

    In Europe, public education is performed at half the cost per student AND has better outcomes.

    There are schools for special needs students who generally feel better being among their peers.

    Higher education in most nations is for free. People never even think about “saving for college”;

    If you are eager, disciplined, work hard, have the brains, pass the tests, you’ll get into college or university.

  13. Norm Etkind says:

    You have to wonder why recent Vermont administrations and public discourse have gotten away with placing such emphasis on the property tax problem despite all the mechanisms to keep it from being too regressive.

    This while health care costs are three times ed cost, are rising three (or more) times as fast, have no budget, no elected people in charge and, as a set cost per person, are the most regressive significant expense we have.

    I believe there are two key reasons for this.

    1. Because it is so regressive, rich folks only pay a tiny portion of their income for their health insurance costs. So, those in power do not see any particular reason to change the system. Plus they pay primarily in pre-tax dollars.

    2. Most workers don’t have any idea how much their health care coverage is costing them in lost wages. They do know that paying their property tax bill requires the biggest check they ever write.

    In order to generate the needed groundswell for single payer, these items need to get addressed. An easy first step is to show workers the cost of their health care with every check. The next step would be for them to have to write the check for it themselves. Another small potential step is to have wealthy people pay for their health care with after tax dollars and begin to pick up a bigger share of the cost.

    Back to my main point – – we are basically getting what we pay for with education (not that there aren’t opportunities for greater efficiencies that we should work toward). But the area where costs are out of control and we have the greatest chance for reducing the burden on lower and middle income people is clearly in the health care arena.

    Any discussion on the terrible education cost burden should be turned on its head with some perspective on the real problems we face.