Also known as a ‘consumption tax,’ would shift school funding burden away from property tax
By Guy Page
Faced with a property taxpayer revolt this year, the House Ways and Means Committee is in the mood to listen to alternatives to funding education with property taxes. Yesterday morning, April 10, it heard a Rutland County senator suggest Vermont abandoning the property tax as a school funding mechanism and replace it with a 1% tax on all transactions.
The plan was originally floated in 2017 by a Rutland-area grassroots group called Make Vermont Affordable, Sen. Terry Williams (R-Rutland) told the committee.
“Make Vermont Affordable believes that education funding should be changed from a property education tax basis to a 1% (or higher, as required) transaction tax. This would be on a state-wide basis and would have the advantage of everyone, including tourists, and on-line purchasers helping to foot the bill. That way, education funding would be equitably distributed to everybody who makes a purchase in Vermont, not just property owners.”
The philosophy behind the transaction tax appears to be “many hands make light work.”
At present, it’s the property taxpayers who are doing the heavy lifting. Vermont has the third highest property tax in the nation, as measured by percentage of personal income, Williams said. The owner-occupied housing rate is 71%, as of 2021. New housing starts haven’t kept pace with population growth, meaning the load falls heavier on owner-occupied housing every year.
This March, an unprecedented number of voters said enough’s enough and voted no on school budgets at Town Meeting, including in many districts (Montpelier-Roxbury, for example) where budget approval is a perennial given.
A Senate bill proposed by Williams, and now in draft form, “proposes to require the Department of Taxes to submit a written report to the General Assembly analyzing and proposing new revenue sources to replace the education property tax and to fund education in the State.” In particular, it asks the Dept. of Taxes to evaluate “creating a new, broad-based tax type.”
Williams suggested a key point of the Vermont Tax Structure Commission of 2018 – “Recommend expanding the sales tax to almost all consumer goods and services.”
Rep. Scott Beck (R-St. Johnsbury) asked for clarification. “Are you talking about eliminating all education property taxes, or just the homestead, or just the non-homestead, or get rid of all taxes?”
“Yes all income tax, too, all taxes, one consumption tax,” Williams said. “We couldn’t figure out what percentage we would have to charge for consumption tax. That would be a tax on all goods and services everybody that came into the state of Vermont, you know including people that were here illegally or people were here selling drugs. They came to Vermont, they had to buy goods and services while they were here.
“Think if we’d had that on Eclipse Day,” Committee Chair Rep. Emilie Kornheiser (D-Brattleboro) said.
One lawmaker asked a question about consumption tax regressivity (“all taxes are regressive,” Williams said), and then Kornheiser thanked Williams for his visit.
Ways & Means is preparing a proposal to provide ‘foundation’ funding of required educational services through non-property tax means, while allowing school districts to impose their own, local property taxes to fund services and programs above and beyond the ‘foundation.’