Lawmakers filed a bill Thursday that would create a flat property tax for all Vermonters and tie local school spending to a variable income tax.
Rep. Oliver Olsen, I-South Londonderry, said H.127 would improve the lack of transparency in the present education finance system and bring more accountability.
According to Olsen, the idea would “bring much greater transparency to the system, so that it’s clear what voters’ decisions on Town Meeting Day are going to have on the taxes that people pay.”
“Under H.127, there would be an income tax structure that would vary based on local spending decisions,” according to Olsen. “Every income-earning Vermont resident would be subject to the tax, regardless of whether or not they own property: local spending decisions would drive income tax rates up or down for local residents, proportionately to per-pupil spending in that community.”
Among the proposals in Olsen’s bill:
• Replace the current variable residential education property tax rate with a much lower fixed residential property tax rate that would be uniform across the state;
• Allow residential rental units to be taxed at the lower residential property tax rate, rather than the non-residential tax rate;
• Implement an education income tax structure that would vary according to local school spending; and
• Eliminate the income sensitivity, property tax rebate, and renter rebate programs (no longer necessary due to the lower residential property tax rate).
Olsen said education income taxes collected from local residents would not be retained by the local school district.
“Although the rates applied to residents in each town would vary according to local school spending, this would be a state tax that would be collected by the state and remitted to the state education fund,” he said.
“Communities with different average income levels would have equal ability to raise money for their schools,” he said. “For example, a poor community with per pupil spending of $12,000 would have the same tax rates as a wealthy community with per pupil spending of $12,000.”
Rep. Kurt Wright, R-Burlington, asked whether voters should be skeptical of a new tax, citing the sales tax, which reduced property taxes only temporarily.
Olsen said creating a greater capacity to spend was “probably my greatest concern with this proposal.”
Here is how the bill lays out the plan for education spending:
“The education tax would be assessed based on the following formula: per-pupil spending divided by the state base spending amount, multiplied by a statewide base rate, multiplied by a person’s federal adjusted gross income for the applicable tier.
“The base rate would be established at levels necessary to facilitate a smooth and equitable transition from the current tax system.”
Non-residential property taxes would remain the same, Olsen said.
