Research & Publications

How to make school taxes fairer this year and beyond

The two most pressing problems in public education are the unfairness in who pays school taxes and the cost drivers out of schools’ control. Current proposals in Montpelier won’t solve either of these problems. We can provide immediate tax relief to thousands of Vermonters by updating income sensitivity and ultimately moving to income-based taxes. And we can address the cost drivers without slashing school budgets, forcing consolidation, or taking away Vermonters’ say in their schools.

Migration: Millennials and the wealthy moved in. Most Vermonters stay put

Recently released IRS data from tax filings in 2022 provide new information about people moving in and out of Vermont. For the third year in a row, the state continued to see more filers enter than leave. Two of these years of growth occurred during the COVID pandemic—2021 and 2022. Over half of those arriving in 2022 were millennials—the generation born between 1981 and 1996—and a quarter of all new filers had incomes of $100,000 or more.

State of Working Vermont 2024

Vermont has one of the highest gaps between wages and costs in the country. This mismatch leaves many Vermonters struggling to afford their basic needs.

The state has made some improvements on affordability in recent years, but in other areas policies have fallen behind. Targeted investments would make a big difference for Vermont families’ economic security. In fact, under Vermont statute, the purpose of the state budget is to address Vermonters’ need for health, housing, dignified work, education, food, social security, and a healthy environment. And Vermont has the resources to honor these obligations and make the state more affordable.

The latest State of Working Vermont Report analyzes U.S. Census and other data including costs, income, and wages to look at how Vermonters are doing and pinpoint the areas where the state can make reasonable policy improvements to help more all residents afford to meet their basic needs.

There’s more to school tax increases than spending

Vermonters have been understandably upset by the abrupt rise in their school taxes for fiscal 2025. Most of the complaints focus on the rise in spending, as does the response from policymakers. But taxpayers may also be affected by changes that make the funding system less fair.

The Agency of Education presented some clear analyses last spring explaining the main reasons for the spending increase: rises in salaries and benefits in response to inflation; health insurance cost increases exceeding inflation; the expanding need for expensive mental health services for students; the loss of federal funds the schools received as part of the pandemic-related American Rescue Plan Act (ARPA). There are other reasons as well, related to fiscal decisions made in the past few years. The expenditures are critical for providing kids with a quality education. But knowing that doesn’t make the tax bumps easier to take. Even modest increases can be a problem if the costs, and who pays them, are not distributed fairly.

In fact, some districts and taxpayers have been facing disproportionately higher bills for a while.

Education funding: The three cliffs problem

Education spending saw its biggest jump in years in fiscal 2025, and school taxpayers are noticing the change in their bills. The increase this year was due to a lot of factors outside both schools’ and taxpayers’ control—inflation, healthcare costs, and the loss of pandemic-era federal support chief among them. All of that led to an increase in total homestead taxes of 12.9 percent, although the rate varied from town to town.

But taxpayers can see their tax bills suddenly balloon even when spending increases are modest. The reason: thresholds built into the system. A majority of Vermont resident homeowners pay all or some of their school taxes based on their household income, which better reflects their ability to pay. But the Legislature has imposed limits on these income-based taxes, which means some homeowners—and the number has been increasing—pay a combination of the income-based and property-based school taxes. The property taxes kick in when homeowners’ incomes or house values pass certain thresholds. These thresholds create tax “cliffs”—sudden rises in tax owed. Because the thresholds haven’t been increased or adjusted for inflation over time, more and more Vermonters have hit these cliffs and seen a jump in their school tax bills.

State of Working Vermont 2023

Big challenges confronted Vermont in 2023. Much of the state was inundated by the second “100-year” flood in a dozen years. Meteorologists recorded 2023 as the hottest year on record. New variants of Covid kept arising, and pandemics are predicted to become more frequent. Problems we faced before Covid are still with us: poverty, food insecurity, shortages of affordable housing and childcare. And the pandemic seems to have made some problems worse, such as inadequate mental health services, especially for children.

Vermont saw a surge of newcomers during the pandemic

Vermont was an attractive destination for people moving from other states during the first two years of the Covid-19 pandemic.

The state saw a net gain of more than 3,000 residents in 2020 and again in 2021, the biggest increases since the IRS began tracking state-to-state migration in the early 1990s.

Many of the new arrivals did not travel far. More than 19,000 people moved to Vermont in 2021, and over half of them came from states in the Northeast. About 16,400 Vermonters moved away; the most popular destinations were other New England states, New York, and Florida. The pattern was similar from 2019 to 2020.

Repealing the Child Tax Credit hurts Vermont families

Senate Bill 56 holds the promise of better childcare at lower cost to more Vermont families. But the bill as passed by the Senate in late March repeals the Child Tax Credit. This would harm the same families, and many others.

S.56 expands the Child Care Financial Assistance Program (CCFAP) and reduces the cost of care for many families. The bill also aims to improve the quality of childcare by increasing the amount CCFAP pays to providers. However, to help pay for the reforms, S.56 repeals the state Child Tax Credit (CTC) passed just last year, eliminating a $1,000 credit that eligible households now receive for each child under six. The repeal would leave at least 8,200 Vermont households worse off financially.

Vermont’s new Child Tax Credit: Improving life for families

Refundable tax credits are an important tool for reducing child poverty and advancing racial, social, and economic justice. They get cash to families efficiently, helping them meet basic needs like food, clothing, and housing. During the pandemic, when many people were out of work, the federal government used refundable income and child tax credits as quick ways of easing families’ financial struggles. Some states, Vermont included, followed their lead by passing state-level child tax credits.

What is the Vermont Child Tax Credit?
Vermont’s Child Tax Credit (CTC) provides $1,000 annually per child under 6 to families with adjusted gross incomes up to $125,000. It is fully refundable—families with low or no earnings can receive its full value. Families earning between $125,000 and $175,000 receive a partial credit. In 2023, over 95 percent of Vermont kids under 6—34,000 children—will benefit from the credit, making it the most robust in the country.

State of Working Vermont 2022

In an accessible chartbook, State of Working Vermont 2022 analyzes Census and other data, including wages, jobs, and employment, poverty, household income, and migration to portray Vermonters’ well-being before, during, and after the arrival of COVID.

This year’s annual report highlights the progress achieved when our government adequately addresses the needs of people and communities. It shows how Vermonters would benefit from the state’s leaders fixing persistent problems, build on the solidarity expressed during the pandemic, and create a state that works for everyone.

State of Working Vermont 2021

State of Working Vermont 2021 tells the pandemic story from the perspective of everyday Vermonters. It’s laid out chronologically, tracking major developments in the disease and the economy, federal and state government responses, medical advances, and Vermonters’ work and family lives. It also discusses the pandemic’s impacts on racial and gender equity, state revenues, and Vermonters’ consumption patterns.

The report highlights lessons learned from the pandemic and the response that can improve Vermonters’ lives during both normal times and emergencies:
• People do better, materially and psychologically, when they have enough money— and so does the economy.
• When crisis hits, Black, Indigenous, and people of color (BIPOC) and women get hit the hardest—but policy can change that.
• When government springs into action it can meet people’s needs.

Vermont’s tools for education funding equity: Weighting and categorical aid

Vermont’s education funding system is built on fairness to taxpayers, to communities, and to students. The state has two tools to help mitigate variable costs so that all schools can afford to educate all their students, regardless of need: categorical aid and pupil weighting.m

This explainer shows how they work.

State of Working Vermont 2020

When COVID-19 suddenly put nearly 100,000 Vermonters out of work, many were already in economically poor shape. Nearly $5 billion in federal assistance to Vermonters definitely helped weather the pandemic, so far. But more is needed, now and in the future. The state needs to invest in the public good—child care, education, housing, and other essentials—to secure the long-term economic well-being of Vermonters.

This story, reflecting the challenges of Vermont’s top-heavy economy and the exacerbating effects of the pandemic, is laid out in State of Working Vermont 2020, Vermont’s economy expanded, but too many Vermonters haven’t seen the benefits of this growth. Wages increased, but more for high-wage workers than for those earning less. Child poverty hit its lowest point in 16 years, but remained at nearly 10 percent. Inequality grew: Half of all 2019 income in the state went to the top 20 percent of Vermonters.

This year’s report includes a graphic breakdown of 2020 federal pandemic aid and how Vermont is using it, as well as stories in Vermonters’ own words about their lives during the pandemic.

State of Working Vermont 2019

Vermonters feel the effects of inadequate public investment
As the economy recovers many are left behind

There are two differing views of Vermont’s economy. Both are true.

1. The recession is over, the economy is expanding, and we have a record-breaking number of private sector jobs.
2. Many Vermonters are hurting and unable to meet basic needs.

State of Working Vermont 2019, published in a readable chart-book format with brief explanatory text, takes a close look at a number of indicators to see how Vermonters and their families were faring economically at the end of 2018.

It also points out that Vermont’s level of public investment has been flat for a quarter of a century and that our failure to make timely public investments is creating serious consequences for Vermonters.

2019 Legislative Report Card: Is Vermont making progress?

As the governor prepares the fiscal 2021 budget with his staff, it’s worth looking back on what the state accomplished in the last legislative session and what’s left undone. Vermont made some progress this year making the kinds of investments that can move the state forward and create an economy that works for everyone, particularly in early childhood education and Reach Up benefits. But a lot of good policies got stuck last year, like minimum wage and paid family and medical leave. And some never came up at all, like how to improve the unemployment system.

To continue to advance these issues, we compiled this short report card assessing the progress made on each of the recommendations during the 2019 legislative session.

It’s time to raise Vermont’s minimum wage

The purpose of the minimum wage is to provide a floor for most workers’ hourly pay. Policymakers already agree that Vermont should continue to set a minimum. The question is whether now is the time to raise it. An assessment of economic indicators shows that low-wage workers, especially those making minimum wage, have lost ground compared with higher-wage workers and compared to the cost of living.

To make life affordable for all workers, Vermont should raise the minimum wage now.

For Reach Up families, basic needs are out of reach

Due to years of underfunding, Reach Up is not fulfilling the state’s fundamental obligation to ensure that families with children can meet basic needs.

• Reach Up benefits are not keeping up with the cost of basic needs.

• Reach Up leaves families in extreme poverty.

• Reach Up assists fewer families in poverty than it used to.

State of Working Vermont 2018

Many Vermonters are not benefiting from the state’s economic growth. That’s the central message of State of Working Vermont 2018. The data are new. But the message was similar in the 2017 report—and the year before that, and the year before that.

State of Working Vermont 2018, published in a readable chart-book format with brief explanatory text, includes indicators designed to answer three questions:

1. Did the overall Vermont economy grow, and who benefited?
2. Were Vermonters able to make ends meet?
3. How was the job market for Vermonters, and who was working?

A Framework for Progress – 2018

With 25 percent more Vermonters living in poverty than in the early 2000s, median household income stagnant, and high-quality child care still not affordable or even available to many Vermont families, the state’s elected officials need to focus on addressing these and other foundational issues in the next biennium. To move Vermont forward, policy makers need to zero in on three fundamental initiatives:

• Make work pay and ensure that all Vermonters can meet basic needs.

• Make smart, evidence-based investments in programs and infrastructure.

• Make state government more effective by increasing public engagement, fairness, and transparency.

A fairer, simpler way to fund education

Eliminate the property tax on primary residences and base school taxes on income

How it works now
In 1997 the Vermont Supreme Court declared the state’s education financing system unconstitutional and required that the Legislature devise a system that provides substantially equal access to public education resources for all of the state’s children, regardless of the wealth of the community they live in. That is what Act 60 accomplished. Before Act 60, property-wealthy communities could raise lots of money for their schools with low tax rates, while property-poor communities had high rates and still were not able to raise much.

2018 Report Card

Vermont made some progress this year making the kinds of investments that can move the state forward and create an economy that works for everyone. The 2018 Report Card is based on a set of policy recommendations published in 2016 called “A Framework for Progress: Investing in Vermont’s people, infrastructure, and good government.”

To continue to advance these issues, we compiled this short report card assessing the progress made on each of the recommendations during the 2018 legislative session.

State of Working Vermont 2017

State of Working Vermont 2017 documents the reality confronting average Vermonters: while the economy grows, their paychecks do not.

Among the report’s findings:

• Wages and incomes are growing fastest for those who already are doing well.
• After accounting for inflation, for most of the last decade the median Vermont household has lived on less than it did in 2006.
• Poverty is increasing, and it is highest among Vermonters of color.
• While nearly all Vermonters have health insurance, housing has grown less affordable and child care less accessible.

2017 Report Card

Vermont made progress this year making the kinds of investments that can move the state forward and create an economy that works for everyone. The 2017 Report Card is based on a set of policy recommendations published last year called “A Framework for Progress: Investing in Vermont’s people, infrastructure, and good government.”

To continue to advance these issues, we compiled this short report card assessing the progress made on each of the recommendations during the 2017 legislative session.

20 years ago, Act 60 fundamentally changed the way Vermont pays for public education

What problem were we trying to solve? Before 1997 Vermont had vast inequalities in education and tax bills from town to town. Towns with ski resorts, lakes, lots of stores, or high-value homes enjoyed well-funded schools with low tax rates. Property-poor towns had to tax themselves at high rates to afford barely adequate schools. For […]

Meeting Vermonters’ needs in Fiscal 2018 and beyond

Vermont’s elected leaders are facing a projected budget gap of about $70 million for fiscal 2018. They have an opportunity to balance the budget, begin to make smart investments that address Vermonters’ needs, and modernize the tax system to better respond to Vermont’s 21st century economy.

The plan described in this report would do three things:

1. Fund the governor’s proposed investments without reducing funding for public education.

2. Solve the budget gap without additional harmful cuts.

3. Eliminate income tax loopholes for upper-income Vermonters while lowering tax rates for everyone.