Public Assets Institute > Policy Areas > Education > A solution needs a defined problem, like the property tax

A solution needs a defined problem, like the property tax

By JACK HOFFMAN, Vt Biz, November 05, 2014

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(link is external) 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 without income sensitivity, but the amount paid by people who qualify for income sensitivity is confidential. 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 less 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.”