Vermont Business Magazine Governor Phil Scott issued the following statement on a proposal from the Legislature to add $60 million in new income taxes to pay for the Education Fund. The bill, H911, would trade off an income tax surcharge with lower property taxes. The governor for the last two years has been seeking cost reductions in public education as enrollments have fallen over the last decade.Thebill is entitled, "An act relating to changes in Vermont’s personal income tax and education financing system."
H911 received preliminary approval in the House on Tuesday. It provides property tax relief on the first $400,000 of one's primary residence. The bill alters the current structure of the homestead education property tax by providing each school district with a base payment equal to the amount of per pupil education spending that could be supported by fixed Education Fund revenues. Meanwhile, for districts that choose to spend above the base amount, an additional homestead tax rate would be equalized across those districts, based on a single property tax yield.
The income tax part of the equation will be back-dated to January 1, 2018. While the bill lowers Vermont’s marginal rates for personal income taxes and excludes certain taxable Social Security benefits from state taxation, it createsa school income tax surcharge to support education financing.
The governor's statement says: “As the Legislature moves forward with an education funding formula change in H. 911, I want to be clear: Without reforms to continue to improve efficiency and right-size our system, this bill does little but change the pocket Vermonters are paying from, while increasing the capacity to raise taxes even more significantly and unsustainably in the future.
“At the start of this year, I called for the Legislature to work with me to ensure that – for the second year in a row – we do not raise a single tax or fee on Vermonters, including statewide property tax rates.
“That’s why I asked school boards to limit school budget growth to 2.5 percent. School boards did a phenomenal job presenting budgets that limited growth. In total, they grew by $28 millionlessthan anticipated.
“They did the difficult work of finding efficiencies wherever possible, while funding a strong education product. Like me, school boards have heard the calls for relief from skyrocketing property taxes, which increased for years, even while, on average, we lose three students from our schools every single day.
“But asking Vermonters to pay a portion of property taxes from their paycheck is not the way to provide relief or lower costs. Yet, that is precisely what the Legislature proposes to do in H.911 without addressing the affordability challenges so many Vermonters face.
“Reducing property tax bills only to make up the difference by collecting more from Vermonters’ paychecks, is not what they’ve asked for and it is not relief.
“Instead, we must look at reforms that ensure our kids see more value from the nearly $1.7 billion we spend on education. Forgoing these reforms will only leave us in the same position, facing funding gaps year after year, even as we lose students.
“Last year, we had an opportunity to realize significant savings through a statewide health benefit while maintaining the same level of coverage for school employees. Unfortunately, the agreement reached with the Legislature meant we couldn’t realize the total available savings, but it did include a provision to revisit a statewide benefit this year.
“I urge the Legislature to act on the opportunity for a statewide health benefit this year – along with other cost containment measures – so we give school boards the tools they need to maximize the value of taxpayer dollars for our students, and a high-quality education system that’s affordable for Vermonters.”
Bill as amended and receiving preliminary approval
Source: Governor.H911. 3.21.2018.