Are you ready for property tax reform?
Our House Ways and Means Committee is considering a proposal to reduce reliance on the homestead property tax by creating a statewide education income tax, better reflecting a person’s ability to pay. Under the proposal we’re now examining, education property taxes would be cut in half and would greatly simplify our current funding system in a number of ways.
Vermont spends about $1.6 billion each year on funding education. About a quarter of that amount is generated through the homestead property tax, about $415 million.
Over the years our system has become so complex that it is virtually impossible to explain. We have household income rules, income sensitivity, circuit breakers, income yield calculations, property yield calculations, income look-backs, equalized pupils, phantom students, the common level of appraisal, property tax credit payments, etc.
This byzantine complexity is simply unfair to our taxpayers, and contributes greatly to mistrust of our state government.
The proposal would clean the state education fund of those expenses that are unrelated to a school district’s job of educating our youth. These unrelated expenses and unfunded state mandates have helped to drive up the cost of public education.
State education budget line items such as the renter rebate program, flexible pathways, adult literacy, the prison-based Community High School of Vermont, lister and reappraisal fees and other programs are not part of a school district’s core mission of pre-K-12 instruction. These expenses would and should become general fund obligations.
Property taxes can be a crushing burden, especially for those who have seen their house values skyrocket over the years without a commensurate increase in income. It should not be the job of state government to force people out of their homes.
The state would set a fixed per-pupil amount of spending. Districts that spend more than that would have to ask voters to pay more on their local property taxes. The costs of extra spending would be twice as expensive than it is now, which should help voters be extra careful when it comes time to vote.
The new education income tax would have a fixed rate statewide. Your first $47,000 of adjusted gross income would be exempt from the new tax. This would replace the current and complicated income sensitivity system.
Some would pay less and some would pay more under the proposal. We continue to study both the impact such a change would have on different classes of taxpayers and what rates should apply.
Many questions remain to be answered. What cap should be placed on high-income earners to make the system reasonable for them? Should the education income tax bills be sent out by local municipalities or by the state? What rates should be applied?
Our goal is to make our system less reliant on the property tax, more understandable and based more on ability to pay.
I’m always interested to hear your opinions. You can reach me by email at firstname.lastname@example.org.
REP. MAUREEN DAKIN
The Appropriations Committee finishes taking testimony on the FY19 budget this week. As members of the administration testified a theme emerged.
Everyone managed to the money. The money being the revenue agreed to in January by the governor and chairs of the money committees in both Houses. This revenue was based on the recommendations of two economists, one contracted by the legislature and one by the administration. Their recommendations are called the consensus forecast.
In his budget the governor used last year’s growth in wages as the basis for determining the amount of “new” money. There are differing methods by which to calculate growth in the economy. He chose this one.
Every commissioner and secretary presented a list of cuts necessary to meet their assigned budgets. Most “new” money was eaten up by items out of their control, such as increases in salaries and benefits, internal services such as IT, fee for space and vacancy savings.
Fee for space is assigned by the Buildings and General Services Department. It’s an interdepartmental transfer of funds intended to provide for the maintenance and repair of all state property. It’s gone up for most property for both years that I’ve been on Appropriations.
In my opinion vacancy savings is a way to manipulate a budget. Every department and agency is assigned a vacancy savings target. It assumes a certain number of employees will leave, retire or transfer. An employee will not be replaced for a specified time so savings accrue in salary and benefits. Positions are not eliminated. They are vacant. If an employee transfers, vacancy savings accrue in one department, but savings are not seen in the other. Anyone who has ever been employed knows that when someone leaves, someone else has to take on additional workload.
Think of some state jobs that you might not want to have vacant. How about prison guards? How about law enforcement officers? How about snow plow drivers? How about social workers just after we’ve added more to help combat the opioid crisis and keep the most vulnerable among us safe? The list goes on and on depending on your personal interactions with state government.
I applaud TJ Donovan, Vermont attorney general. He testified that he simply could not meet his vacancy savings target in its entirety. His budget has no initiatives, data to prove the increased workload, and some of his vacancy savings. His “ask” was for an additional $200,000 to cover the difference. It was an honest response to something he simply did not believe he could do.
The Appropriations Committee now deliberates and makes decisions to develop a balanced budget that works for all Vermonters.