Debate: Income Tax or Property Tax?

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(Host) Advocates of changing the way Vermont pays for education say an income tax would be fairer than the statewide property tax.

But opponents say the proposal would put too much burden on Vermont’s income tax.

VPR’s Bob Kinzel reports.

(Kinzel) When lawmakers return to the Statehouse in January, it’s quite likely that they’ll consider legislation that makes a key change in the way that Vermonters finance education.

The bill would eliminate the residential statewide property tax and replace it with an income tax surcharge.

Under this plan, the existing non – residential statewide property tax would still be used.

Topsham Rep. Bud Otterman is a co-sponsor of the income tax plan. Speaking on VPR’s Vermont Edition, Otterman said the income tax is the best broad based tax to guarantee equal educational opportunities across the state: 

(Otterman) "It’s only through a broad based tax that we’re going to accomplish the purpose of having the children receiving the backing of an equal tax base and the tax base that is logical in Vermont is the income tax…the only really broad based tax that accomplishes payment of the basis of ability to pay is the income tax." 

(Kinzel) Tax Commissioner Tom Pelham says he opposes this approach because it would put too great a burden on the income tax:

(Pelham)"We raise a lot of money through the income tax. If the residential property tax burden were eliminated and that burden were put on the income tax it would mean that Vermonters would be paying –  instead of $593 million in income taxes – that burden would be increased by another $315 million, which is a 53 % increase in the income tax burden." 

(Kinzel) Otterman says the plan is revenue neutral and shouldn’t be viewed as a tax increase:

(Otterman) "I must say that it’s sounds as though some people think we’re raising taxes. We’re not raising taxes. The homeowners currently pay $421 million in property taxes, so rather than increase taxes we at best can be accused of maintaining the level as it is."

(Kinzel) But Commissioner Pelham says higher taxes are inevitable unless the growth of school spending is reduced:

(Pelham)"If we’re going to spend the next session talking about whether we take it out of our property tax pocket or our income tax pocket we’re going to be missing the elephant in the room which is the level of spending and the growth of that rate in the state of Vermont."

(Kinzel) The House Ways and Means committee is expected to study this issue this fall and the panel may make a recommendation before the session begins in January.

For VPR News I’m Bob Kinzel in Montpelier.

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