by Paul Cillo Public Assets Institute It should be obvious by now: You can’t provide property tax relief by raising property taxes. In fact, it should have been obvious long before now. Yet that is exactly what the Legislature included in Act 46, the school consolidation bill, in 2015. (It then repealed that provision in 2016.) And that is exactly what the House Education Committee is proposing again this year. The committee voted on Friday to introduce a committee bill (H.509).
This latest attempt at property tax relief would increase taxes for about half of Vermont towns—the half that has the highest property taxes already—and lower taxes for the towns that have the lowest property taxes.
Seriously. I’m not making this up.
Twenty years ago Vermont got away from its parochial funding system, where each town was largely responsible for paying to educate its own children. The current system recognizes that we’re all responsible for educating all of the state’s children. So all of our education resources are pooled into the Education Fund, and all communities have equal access to that funding pool based on the same set of rules.
The property taxes that go into the Education Fund come from non-residential property based on a single, uniform rate statewide ($1.535 per $100 of fair market value this year) and from primary residences with tax rates determined by each town’s education spending per pupil. The homestead tax rates are the same in towns with the same per-pupil spending, and the rates are proportional throughout the state—that is, a town that spends 20 percent more per pupil than a neighboring town will have a 20 percent higher homestead tax rate.
The current system provides children with equal access to educational resources, and because tax rates are tied to per-pupil spending, it discourages unnecessary spending. Higher spending per pupil results in proportionally higher tax rates, and lower spending per pupil results in proportionally lower tax rates.
H.509 would do away with this proportional system for homestead taxes. Instead, it would create two groups of towns: one below an arbitrary spending threshold and one above. The group below the threshold would have a single, uniform tax rate and receive a fixed amount per pupil—initially about $12,500.
Towns in the second group—those that spend more than $12,500 per pupil—would receive the $12,500 per pupil at the uniform rate and also be in a separate sharing pool. As with the current system, they could expect their tax rates to go up as they spend more per pupil. The ultimate tax rate calculation, however, would depend on how many towns and which towns were in the separate sharing pool.
Vermont had a system like this in the late 1990s and early 2000s. The separate sharing pool was known as the “shark pool.” It proved unwieldy, unpredictable, and confusing, and the Legislature wisely scrapped it in favor of the simpler, proportional system we have now.
We all have a stake in seeing that all children in the state get a good education. H.509, by pitting one group of towns against another, undermines this fundamental feature of Vermont’s school funding system.
Source: Public Assets Institute www.publicassets.org 3.22.2017