Income-Based Education Tax Study Committee Releases Report

The House Ways and Means Committee reviewed a report on recommendations for the creation and implementation of an income-based education tax to replace the homestead property tax. While businesses are facing several significant tax proposals this session, the total impact of new taxes must be considered so the Vermont economy is not overwhelmed. 

The committee that created the report did not weigh the decision of whether it should be adopted and instead opted to outline how the tax should be structured when adopted and did not recommend a specific rate. The executive summary states: “Given the scope of its legislative charge and limited timeframe to accomplish that charge, the Committee decided not to prioritize the policy question of whether an education income tax should be adopted. The Committee decided instead to concentrate on if an education income tax were to be adopted, how should it be structured.” 

Notable recommendations were that homesteads, and two surrounding acres, would be exempt from property tax, but any additional acreage on a homestead parcel would be taxed at the non-homestead rate. Funding would remain tied to the local community’s spending decisions, but rather than being based on property value, it would be based on income. The report recommends that second homeowners would not be taxed on the value of their property, but rather on their earned income in Vermont. However, questions remain on how concerns of out-of-state property owners who do not earn a Vermont income would be addressed.