Vt. lawmakers mull over proposed changes to tax structure
MONTPELIER, Vt. (WCAX) - Vermont’s economy and demographics are shifting, which is beginning to an impact on state tax revenue.
A statewide property tax is the main contributor to Vermont’s nearly $2 billion education fund.
It’s based on the value of your home, your income or a combination of the two.
“Almost no one in the state can tell you how your vote on Town Meeting Day on your district school budget will affect your taxes,” said Bram Kleppner of the Vermont Tax Commission.
To simplify and make Vermont’s tax system sustainable, a key legislative commission recommends replacing the state’s homestead education property tax with an income tax.
They say income-- not the value of one’s house-- is a better representation of wealth.
“As you start paying the education tax based on your income, the education portion of your property tax, which is the biggest part of it, goes away and your property taxes for residents become a purely local tax,” Kleppner said.
The commission also wants to change the sales tax. A small portion of that pays for schools, too, but most of it goes to running state government.
They want to lower the tax rate from 6% to 3%, but tax more goods and services like labor on car repairs, construction and others.
For example, when you go to fill up your gas tank, you pay a tax on this gas which goes to funding our roads and bridges. But as more people are driving electric cars, the state’s transportation fund revenue dries up. Unless you tax the electricity for EVs, something the tax commission describes as broadening the base.
Gov. Phil Scott says Vermont should work its way through the pandemic before taking on any large tax reform efforts. He also is cognizant of reform hurting lower-income Vermonters.
“We better walk before we run. Let’s not get into this too quickly so this isn’t a kneejerk reaction moment,” said Scott, R-Vermont.
Democrats view this report as a framework for tax reform, not as the end product. They say the Legislature needs to go back and conduct more analysis.
“What happens in urban settings, what happens in rural settings, what happens to farms, large landowners, those kinds of things,” said Rep. Janet Ancel, D-Calais.
But with the pandemic still raging, lawmakers may have to wait to hash out the details in person before comprehensive tax reform is passed.
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