Douglas administration urges 7% cut in property tax

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(Host) The state’s Education Fund is enjoying a healthy surplus and it’s likely that Governor Jim Douglas will urge lawmakers to reduce Vermont’s statewide property tax rate by at least seven percent. The administration also wants to make certain that the Legislature doesn’t try to use some of these surplus funds for other state programs.

VPR’s Bob Kinzel reports.

(Kinzel) The Education Fund is in very good shape primarily because property values across the state continue to grow at a sharp rate. Tax Commissioner Tom Pelham says the state’s grand list is increasing by roughly 10 percent a year; a situation that puts additional revenue from the statewide property tax into the Education Fund.

Last winter, when the Education Fund also had a surplus, lawmakers cut the statewide residential property tax rate from $1.10 to $1.05 and the non-residential rate was reduced from $1.59 to $1.54.

Pelham says it’s likely that his department will recommend a larger cut in the statewide property tax rate this winter:

(Pelham) “It’s good news. I think it shows that Vermont’s real estate economy is quite healthy. Keep in mind that the projections of the state economist are that this boom in real estate is not going to last much longer and they see that tailing off. But while we’re in it right now, it’s appropriate to give taxpayers back or to allow taxpayers to keep more money in their pocket rather than sending it into the Education Fund.”

(Kinzel) Pelham says the plan will not automatically result in lower tax burdens because in a number of communities the rise in the grand list will be larger than the reduction in tax rate.

In the past 20 years, there have been times when the Legislature has tapped into a surplus in the state’s Transportation Fund to help pay for some General Fund obligations in order to balance the state budget without increasing taxes. Pelham wants lawmakers to clearly understand that the administration will strongly oppose any effort to use some of the Education Fund surplus to help fund other programs in a difficult budget year:

(Pelham) “I know that there are some out here fearful that there’s this kind of creep that last year the Legislature whether it was looking at proposals for using education funds for adult basic education so there is a tension there but the legislature can make laws and change laws and so folks need to keep an eye on the use of those funds.”

(Kinzel) Pelham will make a specific recommendation concerning a statewide property tax cut in about two weeks. He says it’s likely that the reduction will drop the residential rate below a dollar.

For Vermont Public Radio, I’m Bob Kinzel in Montpelier.

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