[U]nder the finalized tax bill forged by the House and Senate, Vermonters would see some property tax increases, but less that what was proposed under previous versions of the bill.
The tax legislation, H.911, which was wrapped up in conference committee Friday evening, would rely on a hike of 2.6 cents on the residential property tax and about 5 cents on the non-residential tax, to pay for K-12 school budgets. The Senate adopted the conference committee’s report and the House concurred with a roll call vote of 89 to 43 late Saturday evening.
Under the Senate’s tax plan, these rates would have been boosted by about 5 and 7 cents, respectively.
Gov. Phil Scott and many Republicans don’t want taxpayers to see any increases in property taxes next year.
Scott has pitched a plan to buy down the rates with $58 million of one-time money to fill a hole in the education fund. The governor has repeatedly threatened to veto the budget, tax bill and any other proposals that raise additional taxes or fees.
In addition to the property tax increase, the latest tax bill, which the House and Senate are set to vote on tonight in an effort to end the legislative session, would rely on an injection of $9.8 million in one-time money into the education fund and changes to who qualifies for income sensitivity.
Income sensitivity adjustments would now be be capped at $400,000 of property value, rather than $500,000.
“With this change if you have a $500,000 house, the first $400,000 dollars value is based on your income and the other $100,000 you’re going to pay on the penny rate,” Rep.Janet Ancel, D-Calais and chair of House Ways and Means, said in an interview.
“So people with more expensive houses may pay a little more and people with higher incomes will pay more, but we reduced the rate,” she said.
The average tax rate for those who pay on income would be 2.53 percent, .02 percent less than in the rate in fiscal year 2018.
The bill does not include an income tax surcharge, a proposal which the House included in its tax bill to take the pressure off the property tax rates. The plan was rejected by the Senate earlier this month.
While her income tax surcharge plan didn’t make it into H.911, Ancel noted that the latest bill contains pieces of the education finance proposals that have been presented by the House, Senate and the Scott administration this session.
“We tried to give everybody some of what was important to them and anticipate that everyone will accept some things that they didn’t want,” Ancel sad.
The Senate proposed raising property tax rates, Scott proposed using one-time money to patch the education fund and the House proposed eliminating the general fund transfer to the education fund.
The general fund transfer would also be out under H.911, meaning all the revenue from the sales and use tax, and 25 percent of the meals and rooms tax would be committed to the education fund.
The education fund under the proposed bill would no longer pay for many expenses unrelated to K-12 education, including adult education programs, renter rebates, and the Community High School of Vermont, a Department of Corrections program for people in its custody.
In addition to restructuring the state’s education finance system, the tax bill would also see that Vermonters are not hit with an inadvertent $30 million income tax hike that would otherwise be brought on by federal tax changes enacted last year.
The plan would create a Vermont standard deduction and Vermont personal exemptions. The bill also slightly reduces Vermont tax rates and collapses the top two tax brackets.
H.911 also introduces a charitable tax credit for Vermonters that would be capped at $20,000. Advocates have expressed concern over the cap, which the House originally set at $10,000, and the Senate eliminated completely.
Nonprofit leaders have said a cap on the credit would deter wealthy people from making large contributions.
As of late Saturday afternoon, Republicans were unsatisfied with the latest version of the tax bill.
House Minority Leader Don Turner, R-Milton, met with House Speaker Mitzi Johnson, D-South Hero, late in the afternoon, pressing the plan to buy down tax rates with $58 million of one-time money.
Democrats have said they’re not opposed to a smaller property tax increase, which they believe Vermonters tacitly approved when they passed school budgets in March.
“We wanted to have some connection with what people had actually voted at town meeting and so these rates are an effort to at least reflect to some extent what those votes were,” Ancel said.
Editor’s note: this article will be updated with the results of votes on H.911 in the House and Senate.
