Change In School Property Tax Would Target Middle Income Homeowners

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(Host) A plan by Governor Jim Douglas to increase the tax burden of some middle income property owners is facing opposition at the Statehouse.

VPR’s Bob Kinzel looks at the impact of the Governor’s proposal and the political firestorm that has developed.

(Kinzel) Douglas wants to make changes to the income sensitive provisions of Act 68 – that’s a program that allows some homeowners to pay their school property taxes based on their income and not the value of their home and up to 2 acres of land.  Roughly 65% of all homeowners in Vermont currently pay their taxes under this system.

The Governor’s proposal would increase tax burdens for homeowners with household incomes between $60,000 and $90,000.

Here’s how it would work. Take a family with a household income of $75,000 – one person makes $40,000 and the other makes $35,000 a year.

Right now they pay their school tax based on 1.8% of their income plus a smaller percentage based on local spending decisions – so they’re probably paying roughly 2% of their income or $1,500 for their school tax.

Douglas’s plan raises the minimum tax to 3.5%, and when combined with the local spending, the actual percentage would be about 4%.   This means their subsidy will be cut and their tax burden would double to $3,000.

The cost of this program has increased dramatically in the past few years. In 2006, the subsidies amounted to $108 million – the projection for next year is $168 million.

Douglas says this growth isn’t sustainable and he argues it’s fair to make reductions to this program:

(Douglas) "We are reducing their subsidy just as we are asking other people in various Human Service and other programs to share the sacrifice."

(Kinzel) Budget commissioner Jim Reardon says the proposal will help lower the statewide property tax rate and that means that people who don’t qualify for the income program and businesses will have a lower tax burden:

(Reardon) "When someone who is income sensitized is paying more of their share of their property assessment that means some other taxpayer isn’t paying it."

(Kinzel) Senate Majority leader John Campbell says the plan is "an assault on the middle class":

(Campbell) "What the Governor is doing by this is what I will call a shell game, because he’s trying to say this is not a tax increase. This is an increase in tax burden to those people who can afford it the least."

(Kinzel) Douglas says his plan will help reduce overall school spending. Campbell thinks the Administration’s proposal is an insult to the work of local school boards:

(Campbell) "They are out of touch. What they need to do is they need to be at those school board meetings. And they need to go into a school and see how it operates and see what kinds of restrictions are placed on teachers now."

(Kinzel) Douglas also wants to limit the value of a home that qualifies for the program. He says there are over 100 homes currently enrolled that are assessed at more than a million dollars. Senator Campbell says this is an issue that’s worth looking at.

For VPR News, I’m Bob Kinzel in Montpelier.

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