The House approved a bill, H.509, that sets the so-called yield rate — a key benchmark in calculating local tax rates — at $10,077 for landowners who pay based on property value and $11,851 for those who pay based on income.
The bill also sets the nonresidential tax rate at $1.555 per $100 of assessed value, up slightly from $1.535 in fiscal 2017.
The vote was 114 to 25. The bill now heads to the Senate.
But before sending the bill on its way, House members complained that the formula is too complicated and makes it difficult for residents to connect votes on local school budgets to their tax bills.
With Act 46 in 2015, the state changed the calculation and tied it to a base rate of $1 per $100 of assessed property value for those whose incomes aren’t low enough for them to pay based on earnings.
The locally adjusted property tax rate is based on the difference between how much each district decides to spend per pupil and the statewide yield rate, or “property dollar equivalent yield.” That is the product of the total revenues in the education fund, minus spending on programs not directly related to pre-K to 12th grade public education, divided by the total number of students in Vermont schools.
The Agency of Education’s preliminary estimates predict average spending per equalized pupil will be $15,380 in fiscal 2018.
Act 46 set a rate of 2 percent for those landowners who pay based on their income rather than property value.
Scheuermann was concerned that income-based payers were not being charged as much as those who pay on property value.
“I’m asking, what is the essential rate of taxes and how does that compare to last year or even two years ago for both of these classes of taxpayers?” she said.
House Education Committee Chair David Sharpe, D-Bristol, said all three classes of taxpayers are equally affected.
“The percentage increase is the same, not the actual dollars,” said Sharpe.
Scheuermann said the system doesn’t serve taxpayers well. “I don’t understand the economics behind the yield, and I don’t think the public understands what a yield is,” she said. “Taxpayers should understand what they are paying for and why and understand the system itself, and that is clearly not the case.”
Rep. Ron Hubert, R-Milton, said that every year the House argues over rates and yields and the formula remains difficult. “Can you tell me why we can’t come up with a formula that you don’t have to have a Harvard degree to understand?” he said.
“We added complexity from time to time as we have gone along in an effort to move toward fairness, and it most certainly has moved us away from simplicity,” he said.
Some lawmakers said they could not vote for the tax bill due to these concerns, but Rep. Kurt Wright, R-Burlington, told his colleagues that voting no to send a message or because they don’t like the nonresidential rate isn’t the right way to go. If the bill is defeated it would put the state in a bad position and raise the nonresidential property tax rate by 6 cents because it defaults to $1.59, he said.
“Be careful what you wish for,” Wright said. “These rates are simply to pay for the spending that has already occurred in this year” when voters set budgets on Town Meeting Day. Nothing you do will change that unless you ask every school district to revote their budgets.”
The yield rates in H.509 are very close to what the tax commissioner projected in December and what school districts told voters on Town Meeting Day. The commissioner predicted a yield of $10,076 for those paying on property value and $11,875 for income-based payers.
