The amount due on Vermonters’ next property tax bills could have a lot to do with what happens over the next week in Montpelier.
While the House is looking to deliver some immediate financial relief to homeowners, the Senate says going with a short-term fix now will only make things worse in the future.
At issue is the statewide property tax rate, and the lengths lawmakers will go to reduce it. The residential rate was slated to rise by 7 cents next year, the largest one-year increase in the history of the modern education funding system.
In response, the House last month passed legislation that used reserve funds to cut the rate, and bring the increase down to just 4 cents.
But the Senate has other ideas. Chittenden Sen. Tim Ashe is the chairman of the Senate Committee on Finance. Ashe says the House approach is a short-term fix that uses the state’s last dollar bills to paper over a problem that will only reappear next year.
“Choice number two is to take that same money and use it to make system-changing reforms that will save money year after year after year,” said Ashe. “And so we would much rather reserve one-time money for the type of system changes that will provide value and relieve property tax pressure year after year.”
"Choice number two is to take that same money and use it to make system-changing reforms that will save money year after year after year." - Chittenden Sen. Tim Ashe
The Senate plan would redirect the reserve funds away from property tax relief, and into programs designed to bring about efficiencies in schools. Some of the money would be used to offer incentives to school districts to merge together; it would also be used to consolidate the business operations of districts within the same supervisory unions.
But the plan would have one serious consequence. Instead of a 4-cent increase in the statewide residential property tax next year, homeowners would see rates climb by 6 cents. House Speaker Shap Smith says that’s a rate increase Vermonters can’t afford.
“I have real concerns about why the Senate would want to have a 6-cent increase on the residential property tax rate, so at this point in time there’s no way that I can support that,” said Smith.
The tax bill passed by the Senate Friday also raises money to close a small shortfall in the fiscal year 2015 general fund. But its proposal for generating that money differs from the plan put forward by the House and the governor.
Gov. Peter Shumlin wanted to use a tax on health insurance claims, an assessment that would have raised $14 million.
“Which would essentially be $22 on every man woman and child in the state of Vermont,” said Ashe. “In a hidden tax that people don’t even know they’re paying, but it definitely comes out of their pockets.”
Ashe’s committee’s plan would instead generate the money by raising taxes on employers who pay their workers so little that they qualify for Medicaid.
“Every adult on Medicaid costs state taxpayers $3,000 in tax payments,” said Ashe. “Currently, the employer of that individual pays zero dollars.”
The House, meanwhile, wants to tax e-cigarettes and snuff to close the gap. The House, Senate and administration plans all raise different amounts of money – from a low of $3.3 million in the House to a high of $14 million from the governor.
A final decision on revenues – both how to raise them, and by how much – will also determine the fate of proposed spending increases for colleges, Medicaid providers and items in the budget.
