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Vermont Legislature
Follow VPR's statehouse coverage, featuring Pete Hirschfeld and Bob Kinzel in our Statehouse Bureau in Montpelier.

House And Senate Have Different Property Tax Philosophy

If you want to bring a conversation to a standstill, mention the “income sensitive” provisions of Act 68. It’s a complicated subject and some people might not think that the program has much of an impact on their lives.  But the changes being considered at the Statehouse could affect more than 125 thousand households in Vermont.

As lawmakers enter the final weeks of the session, there’s going to be a lot of debate over a bill that’s designed to deal with rising property tax burdens because House and Senate leaders have different ideas of how to approach this issue.

"The income payers in the state have gotten a pretty easy ride in the last several years." Bristol Rep. David Sharpe

Under income sensitivity, if a household has income less than roughly 90 thousand dollars, they’re able to pay their education tax based on a percentage of their income instead of the value of their property. Last year, the state spent more than 150 million dollars to finance this program.

This year the House approved a bill that makes several key changes. The legislation expands the eligibility threshold to roughly 120 thousand dollars. This would add another 16 thousand households to the program.

This expansion is paid for by doing two things. First, the bill changes the formula to determine tax burdens for current participants. These households would see an eight to 10 percent increase in their tax payments over the next two years.

Second, the statewide non residential rate would increase by seven and half cents.

Bristol Rep. David Sharpe says one goal of the bill is to restore some balance among Vermont’s three types of property taxpayers; people who pay based on income, other residential taxpayers and non residential taxpayers.

“The income payers in the state,” said Sharpe, “Have gotten a pretty easy ride in the last several years.”

Sharpe says the legislation also calls on lawmakers to design a system by 2017 where virtually all households would pay their school taxes based on their income.

“That leap in one year is too big a leap to take,” said Sharpe. “But by doing what we’ve done here and then continuing to increase the number of Vermonters who pay for education based on their income the leap is easier to move from a property tax based system to an income based system.”

Chittenden senator Tim Ashe is the chairman of the Senate Finance committee. He doesn’t like the idea of asking current households that pay their education tax based on their income to shoulder a larger tax burden:

“If we treat it as a closed loop, the construct that’s come over by and large looks to renters or people who pay based on income to pick up the tab,” said Ashe. “And I think in the Senate we haven’t reached the conclusion that’s a trade off we’re quite ready to make.”

And Ashe doesn’t think people with large assets, like a second home, should qualify for the full benefit of income sensitivity on their primary residence.

“Right now there are some people who have millions of dollars of assets but report fairly modest incomes who get eight thousand dollars subsidies,” said Ashe. “When you get an eight thousand dollar subsidy on your tax bill other people are paying for it.”

It’s likely that the legislation will come before the full Senate by the end of this week.

Bob Kinzel has been covering the Vermont Statehouse since 1981 — longer than any continuously serving member of the Legislature. With his wealth of institutional knowledge, he answers your questions on our series, "Ask Bob."
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