Vermont Senate Democrats have sided with Republican Gov. Phil Scott on a proposal that would use more than $100 million in one-time money to artificially lower property tax bills this year.
The proposed buydown is by far the largest discretionary line item in the state budget that cleared the Senate this week. And it could emerge as one of the biggest sticking points as the Legislature and the governor negotiate a final version of the $9.3 billion spending plan.
Rising education costs have seen property tax bills soar by an average of 40% over the last five years, and Vermonters will see another 10% increase later this year if elected officials do nothing.
“If we do the whole buydown this year, there is no plan for what we do next year."House Speaker Jill Krowinski
While Scott has acknowledged that using one-time money to buy down rates is generally poor fiscal policy, “and doesn’t actually fix the problem we’re trying to solve,” he said the severity of the pressure on taxpayers requires the “Band-Aid.”
“Vermonters need relief right now,” Scott said during a media briefing. “If we don’t do enough to help, we’re going to see more multi-generation Vermonters leaving for states that are more affordable.”
House Democrats, however, say Scott’s plan – it relies on $105 million in one-time money to bring average property tax increases down to about 3.8% - sets taxpayers up for an even sharper tax increase next year.
One-time appropriations provide only a temporary shield against tax spikes – about half of this year’s projected increase, for example, is the result of lawmakers and the governor buying down rates last year.
House Speaker Jill Krowinski said this week that spreading the $105 million buydown over two years – as her chamber did in its version of the state budget – provides more stable relief. The House proposal would result in an average property tax increase of about 7% this year.
“If we do the whole buydown this year, there is no plan for what we do next year,” Krowinski said. “It’s just going to be a bigger number and be a lot harder on Vermonters if we don’t have anything next year.”
Scott, who has threatened to veto the state budget over the issue, has had more success selling Senate Democrats on his plan.
Washington County Sen. Andrew Perchlik, the Democratic chair of the Senate Appropriations Committee, said this week that he understands the House argument that it’s better to “have a slow ramp down than a cliff.” But he said he’s worried that property taxes have begun to exceed what many low- and middle-income homeowners can afford to pay.
“The property tax increases have been so high in recent years, and we do have the money now,” Perchlik said. “Trying to get it to a normal inflationary increase for one year is worth it, and we’ll see what happens next year.”
Some lawmakers say the buydown will disproportionately benefit the high-income, high-wealth Vermonters who own the most expensive homes, and therefore pay the most in property taxes.
“In a moment in time where our wealthiest taxpayers are getting huge federal tax cuts, I think it’s fiscally irresponsible to spend that amount of money to give them further tax cuts when we have people who truly can’t pay more,” said Chittenden County Sen. Tanya Vyhovsky, a Progressive/Democrat.
Brattleboro Rep. Emilie Kornhesier, the Democratic chair of the House Committee on Ways and Means, said she too has concerns about how the $105 million will be distributed over the tax base. But she said Vermont’s complex education financing formula prevents the Legislature from offering more targeted relief.
“I really wish we could,” Kornheiser said.
