Panel reduces statewide property tax increase from 7 cents to 4 cents, commercial payers to see 8 cent increase

A House panel will bring the property tax rate down from an initial 7 cent increase down to 4 cents for residential homeowners. The proposal pushes commercial rates up 8 cents.

The House Ways and Means Committee took a straw poll on the proposal on Tuesday, and lawmakers supported it in a 7-4 vote. Rep. Adam Greshin, I-Warren, voted against the proposal because he said the 8 cent increase is a roughly 5 percent jump in the tax for non-residential taxpayers and it “strains the notion of fairness.”

Though legislators on the panel are still working through a number of details in the committee bill, they agreed to a 98 cent tax on the base rate for homeowners and a $1.52 rate for commercial payers. The base education amount, which is used in the formula for calculating the actual rate property taxpayers are assessed, will go up to $9,382.

Taxpayers who earn less than $47,000 a year will see no change in their income sensitized rebate under the plan. Middle class taxpayers who earn between $47,000 and $90,000 and get a partial subsidy will see a slight adjustment in rebates, according to Rep. Janet Ancel, chair of the committee. The slope has been extended and now includes people who own houses valued at $250,000. (Previously, the cutoff was $200,000.)

The panel lowered the limit on the total amount in income sensitivity rebate money that can be distributed to an individual household from $8,000 to $6,000.

In addition, the base income rate will go from 1.84 percent to 1.9 percent. Raising that rate, Ancel says, will address growing inequity in the Education Fund.

“This bill reduces the impact, and more fairly distributes the impact as compared to the recommendation from the administration,” Ancel said.

The tax reduction comes from changes to the formula numbers and $6 million in surplus funds.

School budgets came down from the anticipated high of 3.8 percent to 3 percent, Ancel said, and gave the committee more leeway (roughly $8 million) to reduce the rates.

Nevertheless, spending went up 3 percent, she said, “and that 3 percent is going to show up in the rates, but we need to recognize the fact that they went up less than anticipated. That’s the work of school boards.”

Gov. Peter Shumlin and the Vermont Department of Taxes recommended a residential tax increase of 7 cents next year unless school boards could significantly reduce spending.

The statewide property tax is going up 5 cents this year.

Anne Galloway

Comments

  1. Jim Christiansen :

    Anne,

    Do you have a projection from the legislature for next years rate of increase? Is our legislature making a wise choice reflective of spending trends, or are they simply taking the steam out of a hot issue before facing the voters at election time?

    Thanks!

  2. Wayne Andrews :

    These legislators just took the blade out of my back a little and stuck it into my plumbers back a little more.

  3. Jamie Carter :

    Unfortunately politicians in general do not know how to think outside of the box and create actual change. The property tax as a way of paying for education is archaic. Time for a change…

    And if Mrs Ancel and collegues can not figure out what that change should be they should be changed to someone who can.

  4. Mark Milazzo :

    Anne:
    Did you mean Non-Residential vs Commercial?
    Mark

    • yes sorry for the confusion. commercial is a subset of non-residential

  5. Moshe Braner :

    “they agreed to a 98 cent tax on the base rate for homeowners and a $1.52 rate for commercial payers.”

    – That sentence mixed together two concepts of “rate” and that may be confusing. It should be emphasized that that would be the actual rate for commercial payers, no matter what the local spending (no skin in the game), while homeowners would pay that “base rate” multiplied by the ratio of local per-student spending to the “base education amount”. In some towns, the homeowners end up paying a higher rate than the commercial payers.

    Moreover, the percentage increase in that “base education amount” should be stated, since it counteracts the increase in the “base rate”. If the “base amount” is increased by the same percentage as the “base rate”, there would be NO INCREASE in the actual rate paid by the homeowners — in school districts that do not increase their per-student spending (yes, big gotcha). This kind of balanced change actually happened in some recent years.

  6. Steve Allen :

    This change would provide some welcome relief to homeowners. Unfortunately, it will have the opposite effect on many households that rent. A higher “non-residential” tax rate will increase the cost burden on Vermont’s 75,000 rental units. When taxes increase on an apartment property, the direct result is higher rents. I hope the Committee will consider this inequity in their quest for fairness.

  7. Dave Bellini :

    Too bad Howard Jarvis is dead.
    Vermont needs property tax reform that sets concrete caps on how much home owners can be shaken down.
    .
    How about capping property taxes at a percentage of the homes’ fair market value? That would be too simple.
    .
    Imagine a world where everyone know exactly how much government cost and where every penny was spent. That would make the public more powerful and what politician or political party wants that?

  8. Kathy Callaghan :

    Another business-friendly move, as New York State runs enticing ads on TV to move your business there and get a 10 year tax abatement.

  9. Bradford Little :

    Property tax is a philosophical abomination! The ONLY measure of what a person can spend on wants, needs, and taxes is how much MONEY they have available or as income……NOT the value of their property!All states are struggling with this. At least Vermont has incorporated an “income sensitivity factor” ( unless you don’t live in the state ) Taxing inanimate, non-income producing “stuff”…property, objects, etc. is reminiscent of feudalism! It is painful, unjust and destructive in the sense that people of means as well as some commercial enterprise entities will leave. Income and consumption taxes may be equally painful but at least are based upon actual, spendable cash.

    • Karl Riemer :

      If only life were so simple. Taxing inanimate, non-income producing “stuff” is how turning actual, spendable, taxable cash into mansions and estates, thereby avoiding paying taxes, is avoided. It’s the diametric opposite of “reminiscent of feudalism”. An argument can be made about property tax efficiency and progressivity, but calling it “a philosophical abomination” is not an argument, it’s a pretense. All this hyperventilation about being mean to rich people, by, for instance, discouraging them from buying property in Vermont as a tax dodge, doesn’t amount to a hill of beans. The owners of seldom-occupied luxury houses are not the backbone or essence of Vermont and contribute little besides taxes, so let them contribute taxes. “People of means” who actually live here get a say in whether they contribute based on income or property value, but people whose residence and income is elsewhere should not get to buy up Vermont tax-free. Froth like this is just one more barely-concealed effort to exempt the super-rich from civic responsibility.

      • Bradford Little :

        I was born in Vermont. I have lived an worked in Pennsylvania for 45 years. I am not wealthy. My Vermont property, inherited, was hand built by my parents……unfortunately/fortunately it is lake property. The valuation has increased dramatically….. so has the tax. I am retired….fixed income. I love my native state…. but the increasing tax burden may eventually force me to give up. I am NOT looking for a way to avoid paying taxes in Vermont…..I pay the gasoline tax, sales tax, utility usage taxes, and would gladly pay any other kind of consumption tax for services…fire, police , whatever. I donate to the Vermont Nature Conservancy, the Vermont Historical Society, and others. All of that based on my disposable income or level of usage……..the property tax IS an abomination….an unfair way to fund education.

        • J. Scott Cameron :

          You are left with two choices – get poor from paying taxes or get rich from selling land.

    • Moshe Braner :

      The property tax is an abomination that is mean to poor people, not rich. The types of property being taxed are NOT purchased as a way to avoid paying taxes. On the contrary: on the average, richer people pay a smaller percentage of their income for real estate than poorer people do. More of their income goes to other, untaxed, assets (such as investments that result in “capital gains” which are taxed at a lower rate than “earned income”). Had their full income been subject to an income tax, that portion of it would not have been available for the purchase of real estate. (I’m not going to get here into the pros and cons of exempting mortgage interest from the income tax.) Our current education funding system taxes middle-income people by income, but the rich only based on property, which results in their paying a smaller percentage of their income.

  10. Valerie Mullin :

    Schools did their job and held the line but Montpelier didn’t. 8% increase is for Non-residential which also means businesses and landlords (rent increases) if I understand correctly. This is a shifting of the problem, not addressing the problem. Businesses are running out of reasons to stay in Vermont……..

    • J. Scott Cameron :

      You understand correctly.

    • Jay Kearns :

      Valerie is right on the mark. These discussions and the proposed legislation to “juggle” the costs of education are just clouding the real problem which is: Vermont education costs are totally out of control. Many local school districts, mostly those who are “gold towns” have done a reasonable job of controlling costs. Others have spent (and have an incentive to do so) heavily under Act 60/68. In the meantime, the State Ed Dept. and the Supervisory Districts (on which we have no vote) have constantly increased spending. Emphasis MUST be focused on reducing costs at these levels, not just coming up with more cost juggling which divides the voters. Remember – we are one of the top 5 “cost per student” states in the nation.

  11. Tim Hollander :

    Are we taxpayers supposed to applaud this?

  12. Bill Olenick :

    Bait and switch.
    Go for the high rate, settling for the lower rate, which is the rate they wanted in the first place.
    The voters are entitled, and empowered, to play the same game at the ballot box, come re-election day…
    Give em’ and inch they’ll take a mile.

  13. Steve Allen :

    Under this proposal, the education tax rate for renter occupied housing is 55% higher ($1.52) than owner occupied housing ($0.98). That is an enormous difference, and the inequity is worsened because the majority of Vermont’s lower income population is dependent on rental housing. Both types of housing (renter and owner occupied) have an income sensitized relief program, but to have the basic tax rates so different seems extremely inequitable.

    • Moshe Braner :

      See my comment above. Your comment helps demonstrate my point that those “rates” were not explained well.

  14. Paul Lorenzini :

    They will add double the amount they cut this year, next year, ye hah!

  15. J. Scott Cameron :

    OK, let me see if I understand.

    First, the VT legislature proposes to raise taxes on commercial taxpayers (AKA, “the few”) so that it can lower taxes on homeowners (AKA, “the many”).

    Concurrently, the Vt legislature (pushed by the Governor) proposes to raise the minimum wage, a ‘tax’ that will, again, fall only on the Vermont commercial sector.

    How long do Vermont politicians and the special interests to whom they cater think the Golden Goose can keep laying eggs?

  16. Helen Keith :

    The homestead property tax rates even with income sensitivity are way too high already for people with low earned income or fixed income – pretty soon investors will be buying up those little, un-fancy homes people have worked hard to acquire thinking they might be somewhat permanent. I support positive outcomes for children and appropriate sources of tax revenues to support them and am willing to pay for our SD decisions and have equalized statewide opportunities, just not from property taxes. The property revenue sources used now have unintended negative consequences and in my opinion are bad social policy.

  17. Paul Lorenzini :

    Property tax in VT is akin to lot rent at the trailer park. If you think you own anything here, think again. You are only a temporary occupant of the parcel that you inhabit, for the crap headed idea of the common good. Your children will never be able to afford to live on your property in perpetuity because the taxes will drive them out of consideration. Don’t forget they will be busy paying off the $17.4 TRILLION and rising national debt, that here in VT the politicians that walk in lockstep with the regime in DC, would lead us to believe we are immune to. This country was not founded on the idea of “common good”, it was founded on the idea of “common sense”. Where does that exist in the Ivory Towers that our tax dollars support? You do not need to have any common sense in order to get a degree or diploma, only pass the tests and kiss the teachers arse!

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