A combination of known factors and previously unexamined issues contributed
Public Assets Institute Newly released analyses from Public Assets Institute outline factors that contributed to the FY25 education tax spike.
New analyses from Public Assets Institute have revealed that some districts and taxpayers have been facing disproportionately higher bills prior to FY25. “Low- and moderate-income Vermonters can see big tax jumps even when spending doesn’t change because of income and property value ‘cliffs’ that are built into the system,” said Stephanie Yu, President and Executive Director of the Public Assets Institute.
The new analyses outlined three cliffs:
- $47,000 income cliff: at or below that amount, taxpayers’ school taxes cannot exceed 2 percent of their income. But above $47,000, taxpayers pay the town tax rate on income, which averaged 2.56 percent in fiscal 2025. This threshold has not changed since before Act 60 was enacted in 1997.
- $90,000 income cliff: Middle-class Vermonters earning $90,000 or more pay a property-based school tax on housesite value in excess of $225,000 in addition to an income-based school tax.
- $400,000 housesite value cliff: Taxpayers with incomes below $90,000 also hit a cliff—they pay property taxes on housesite value in excess of $400,000.
“While the increase in overall spending in fiscal 2025 meant many more taxpayers faced spikes, these thresholds have been causing problems for an increasing share of Vermonters for years,” said Yu. "This means that spending cuts won’t address either of these challenges—disparate costs from district to district or the inequities low- and moderate-income taxpayers face. In addition, we’ve identified several other factors, many outside of districts’ control—that affected the total cost of education statewide in FY25.”
Those include:
• 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)
• And consequences related to policy changes made in the past few years
“The main goal of our education funding system is clear: the best education we can provide for every child. We can all agree that unexpected tax spikes are not good policy, and neither are inequitable tax systems,” said Yu. “Some costs for educating our children may be out of our control, but eliminating these inequities would make the system fairer and keep the focus where it belongs: on Vermont kids.”
10.2.2024. MONTPELIER—Public Assets Institute is a nonprofit, nonpartisan organization in Montpelier that promotes sound state budget, tax, and economic policies that benefit all Vermonters. More information at www.publicassets.org
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