Proposed Legislation Would Base School Taxes On Income, Not Property Value

Feb 15, 2016

If there’s one major hurdle to lowering property taxes in Vermont, it’s that you have to cut spending on schools in order to do it. But Progressive lawmakers in Montpelier say they’ve found a way to sidestep that obstacle. 

The legislation would deliver immediate relief to the vast majority of property taxpayers in Vermont, and it wouldn’t require schools to shave a cent from their budgets.

“We hear a lot of talk about affordability in the Statehouse. We hear a lot of people talking about their concern about the middle class and lower-income Vermonters,” says Washington County Sen. Anthony Pollina, a Progressive/Democrat. “This gives us the opportunity to really do something about it.”

Recent legislative attempts to provide property tax relief have focused on ways to curb the growth in education spending. Pollina has introduced legislation that ignores the cost side altogether, and instead changes the way the money is raised.

Under the plan, Vermonters would pay property taxes based on income, rather than the value of their homes.  

“And when you do that, you raise a lot more money from the people at the top, and therefore you can deliver relief to a great majority of Vermonters,” says Burlington Rep. Chris Pearson, who has introduced a very similar piece of legislation in Vermont House. 

Pearson, the leader of the House Progressive Caucus, says the plan provides an elegant solution to a vexing dilemma.

If you're in a household making less than $200,000 a year, you'd likely see a decrease in your annual property tax obligation. Make any more than that, and your bill would probably rise.

“The question has always been, ‘Well, how do we keep our schools in solid shape and also deliver property tax relief?’” Pearson says.

Under the Pearson/Pollina proposal, the answer is to have everyone pay 2.5 percent of their income to the education fund, regardless of how much their property is worth.

If you’re in a household making less than $200,000 a year, you’d likely see a decrease in your annual property tax obligation, according to a legislative analysis of the proposal. Make any more than that, and your bill would probably rise.

The more you make, the more severe the increase. For households pulling in more than $1 million annually, for instance, the median bill would go from about $9,000 a year to nearly $40,000.

"We hear a lot of people talking about their concern about the middle class and lower-income Vermonters. This gives us the opportunity to really do something about it." - Washington County Sen. Anthony Pollina

Pearson says that might be a bit too much of a jump, and he says he's ready to make some tweaks. Fundamentally, however, he says richer Vermonters have enjoyed the lion’s share of the economic gains in recent years.

“So the new money is going overwhelmingly to those at the top, so the idea that we would ask them to pay a little bit more in tax revenue I don’t think is far-fetched,” Pearson says.

House Minority Leader Don Turner says everyone is already paying too much, whether they’re in a working-class family or a high-earning one. And he says lawmakers shouldn’t circumvent the real problem by intensifying the burden on rich people.

“What we’ve got is a system that’s spending far more than people in Vermont can afford to spend, and not really achieving the outcomes that we strive to do," he says.

Turner says it’s low teacher-to-student ratios driving the school spending problem, and that the Legislature should find ways to reduce labor costs in public education.

But Pollina says education costs should be redistributed no matter how much Vermonters are paying for schools, since middle-class Vermonters are paying a greater proportion of their income toward public education than higher-earning residents.