Group pushes plan to replace residential property tax

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(Host) There’s a new plan to eliminate the residential property tax for education and replace it with a 2% income tax.

And the group backing it is made up of Democrats, Republicans and Progressives.

The group says the plan more accurately reflects a homeowner’s ability to pay education taxes, and will help control school costs in the future.

But, the Douglas Administration opposes the plan.

VPR’s Bob Kinzel reports:

(Kinzel) While the concept behind the plan is quite simple, backers admit there are many details that still need to be worked out.

The basic idea is to replace the current state and local residential property tax for education with roughly a 2 % income tax. This tax rate would be linked directly to local school spending levels so if a town spends above the statewide average, their income tax rate goes up as well.

The existing statewide property tax for non residential property would be maintained.

Topsham Republican Bud Otterman is the vice chairman of the House Ways and Means committee and one of the sponsors of the plan.

(Otterman) “We need to move off the property tax for the homeowners and to find a tax that actually reflects an ability to pay. If we did that we would not have to get into income sensitivity, which is a very costly part of our present system.”

(Kinzel) Progressive leader Chris Pearson says the plan is revenue neutral and represents a tax shift for most homeowners.

(Pearson) “This is not a tax increase. It’s not about changing the income brackets that pay our taxes. It’s about simplicity, equity and creating a very direct point between school spending and tax rates.”

(Kinzel) Essex Democrat Tim Jerman thinks the plan will help moderate future school budgets because there’s a direct link between the income tax rate and local spending levels:

(Jerman) “We do think that once you’ve established that direct link and it’s very simple that you’ll know what your local tax rate spending is and if it’s above the average you’re going to pay more. And that will have a direct effect on how people view costs in their districts.”

(Kinzel) Tax commissioner Tom Pelham strongly opposes the new plan. He argues that the income tax is a volatile revenue source and that over reliance on the tax could hurt the state economy.

(Pelham) “I think it’s bad fiscal policy. I think it jeopardizes the ability for Vermont to fund its human services programs through the General Fund because that’s basically what the income tax is used for now. But also it’s trying to address the wrong problem. The problem here is cost containment and spending rates. The problem isn’t funding new sources of revenue to support education spending.”

(Kinzel) Backers of the plan admit that there isn’t enough time in this year’s session to pass it – they’re hoping a special summer study committee will review the proposal and present lawmakers with a bill that can be considered next January.

For VPR News I’m Bob Kinzel in Montpelier.

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