Tax Commissioner: Education Funding System Is ‘Unsustainable’

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Tax Commissioner Richard Westman says Vermont’s reliance on the statewide property tax to help fund education isn’t sustainable.

As VPR’s Bob Kinzel reports, Westman wants lawmakers to address the issue before it becomes a major crisis.

(Kinzel) Westman says the current recession is having a major impact on the funding of education in the state.  That’s because property values are falling in many communities – a situation that will most likely require lawmakers to back a higher statewide property tax rate this winter.

Speaking on VPR’s Vermont Edition, Westman said the current system is unsustainable because there are a lot of different programs that receive tax credits and because roughly two thirds of all households pay their property taxes based on their income, not the value of their property. He says this development will place a growing tax burden on other Vermonters:

(Westman) "If we don’t look at that now, we’re on the edge of a cliff.  If the grand list is shrinking and that’s going to force rates up 26% for homesteads over the next 3 years, I think that that’s something that is going to have a detrimental effect on Vermonters."

(Kinzel) Westman says Governor Douglas will recommend some changes to the current system in January. Based on the Governor’s previous plans, Westman expects a lot of complaints when the new proposals are unveiled next month:

(Westman) "Everybody starts this discussion from ‘mine, mine, mine’, and nobody stands back and takes a look at the whole. If we get three years out and we’re facing a 12 cent increase in one year, we will be making decisions at a place where people will be rushing in to the do things that don’t make sense."

(Kinzel) Paul Cillo is the executive director of the Public Assets Institute, a policy think tank based in Montpelier.

He says a new study shows that people who make more than $200,000 a year, pay a smaller percentage of their overall income to pay for education, than many other people of more modest means:

(Cillo) "The wealthiest Vermonters pay a lower percentage of their income than middle and low income Vermonters. So if you reduce the income sensitivity function as opposed to expand it what you’re going to do is raise taxes for the low and middle income Vermonters."

(Kinzel) The state is projected to spend roughly $160 million next year on its subsidy programs for families with incomes less than $90,000.

Last year, Governor Douglas proposed reducing eligibility levels for the program – Cillo thinks those levels should be expanded:

(Cillo) "What we should do is expand the income sensitivity so that people in the income range that’s just above $90,000 –  which is a range that is seeing the highest percentage of their income – that that will actually be a flat tax all the way across."

(Kinzel) A special blue ribbon panel is scheduled to make a series of property tax reform recommendations to the Legislature in January.

For VPR News I’m Bob Kinzel in Montpelier.

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