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Senator’s proposal would transform one-time purchase surcharge into yearly assessment
In a letter to VTDigger, Senator Kesha Ram Hinsdale has proposed expanding Vermont’s property transfer tax surcharge on second homes into an annual vacancy tax, arguing that the state should differentiate between “homes people live in” and properties used only occasionally. The proposal aims to address Vermont’s dual challenges of housing affordability and rising education costs by shifting more of the tax burden to non-resident property owners.
The Current System: How Vermont Already Taxes Second Homes
Vermont currently imposes what Senator Hinsdale calls a “vacancy tax” at the time of purchase through Act 181, enacted in 2024. Under this law, buyers of residential property who will not use it as their primary residence face a property transfer tax rate of 3.4%—dramatically higher than the standard 1.25% rate applied to primary residences. The higher rate applies unless the buyer obtains a landlord certificate proving intent to rent the property long-term.
The standard property transfer tax revenue is distributed according to a statutory formula: 33% to the General Fund for state operations, 50% to the Housing and Conservation Trust Fund, and 17% to the Municipal and Regional Planning Fund. An additional 0.22% surcharge supports the Clean Water Fund.
Revenue Performance Exceeds Expectations
Senator Hinsdale’s claim that the current purchase-time surcharge “brought in more revenue than state forecasters predicted” is supported by Joint Fiscal Office reports. In November 2024, the property transfer tax performed 28.3% above its monthly target and 21.4% above its cumulative forecast for the year, even as other revenue streams showed volatility.
This over-performance suggests that buyers with the capacity to purchase second homes remain willing to pay the higher one-time tax, validating the Senator’s assertion that such individuals are “willing to pay more quietly and without much fuss” when seeking property in Vermont’s high-amenity environment.
The Economic Mobility Question: A Factual Dispute
Senator Hinsdale states that Vermont was “just ranked last in economic mobility,” but comprehensive data contradicts this claim. According to the Archbridge Institute’s 2025 Social Mobility Index, Vermont ranks second in the nation for social mobility, trailing only Utah. The ranking considers educational attainment, social capital, and economic opportunity.
Research from Opportunity Insights, led by Harvard economist Raj Chetty, similarly identifies Vermont as having among the highest levels of social capital in the nation—a primary driver of upward mobility. While Vermont, like most states, has experienced a decline in absolute income mobility over recent decades, it has not fallen to the bottom of national rankings.
Vermont’s Second Home Reality
The Senator’s characterization of Vermont as having the “highest rate of second homeownership in the nation” is nearly accurate. According to U.S. Census data and Vermont Joint Fiscal Office tax studies, Vermont has the second-highest percentage of second homes in the country, behind only Maine.
This demographic profile creates a unique fiscal dynamic: non-resident homeowners contribute substantially to Vermont’s Education Fund through property taxes while placing minimal demand on the state’s most expensive service—the public school system. This allows Vermont to effectively “export” a portion of its tax burden to out-of-state owners.
The Rate Disparity: When Residents Pay More Than Second Homeowners
Senator Hinsdale’s claim that “in more than a third of Vermont communities, second homeowners currently pay less than the homestead rate” reflects the mechanics of Vermont’s dual property tax system. The state applies different rates to homestead properties (primary residences) and non-homestead properties (second homes, businesses, and rentals).
Homestead rates are determined by local per-pupil spending approved by voters in each school district, while the non-homestead rate is set uniformly by the state legislature. When local communities approve budgets that result in high per-pupil spending, their homestead rate can exceed the statewide non-homestead rate.
For fiscal year 2026, towns including Hartland, Killington, Plymouth, Jamaica, Barnard, and Brattleboro all show homestead rates higher than their non-homestead rates—meaning primary residents pay more per dollar of property value than second-home owners.
However, this disparity results primarily from local democratic choices about school spending rather than a failure of state tax policy. Additionally, non-homestead properties cannot claim “income sensitivity” credits, meaning their actual tax payments per dollar of property value are often higher than many residents who receive state tax adjustments.
The Income Sensitivity Protection
A critical component not addressed in the Senator’s commentary is Vermont’s existing “income sensitivity” or property tax credit system. Approximately 65% of Vermont homeowners currently receive credits that cap their school tax liability at a percentage of household income rather than property value.
For a family earning $50,000 annually in a town with $10,000 per-pupil spending, the tax bill remains fixed regardless of whether their home value is $200,000 or $400,000. This mechanism already protects many working families from property value inflation.
Commercial Vacancy: Downtown Storefronts
Senator Hinsdale extends the vacancy tax logic to commercial properties, arguing that “perverse financial incentives” encourage leaving storefronts empty rather than lowering rents. Research into commercial real estate identifies several mechanisms that may favor vacancy:
Commercial property valuations are often calculated based on rental income, meaning lowering rent for a new tenant could officially devalue the building and potentially trigger loan-to-value violations in mortgage contracts. Landlords may also prefer waiting for high-credit national tenants rather than signing lower-rent leases with local startups perceived as higher risk. In markets with high asset price appreciation, capital gains may exceed lost rental income.
Similar commercial vacancy taxes have been explored in San Francisco and Vancouver with varying degrees of success.
Implementation Questions
The Senator asserts that implementing a vacancy tax “does not require intrusion or looking through people’s windows” because Vermont already uses Homestead Declarations and Landlord Certificates. However, these documents identify residency for tax credit purposes, not daily occupancy.
A true vacancy tax would require more granular reporting to distinguish between frequently used second homes and truly abandoned properties, potentially increasing administrative burdens for the Department of Taxes and raising privacy concerns about occupancy verification.
The Tourism Economy Factor
The proposal does not address potential impacts on Vermont’s tourism economy. Second homes often function as short-term rentals, and heavily taxing them could affect the state’s Meals and Rooms tax revenue and overall tourism sector. Additionally, out-of-state owners frequently invest in rehabilitation and maintenance of Vermont’s aging housing stock.
What Happens Next
Senator Hinsdale’s proposal represents a significant expansion of Vermont’s existing property transfer tax surcharge into an ongoing annual assessment. The concept would require legislative action to implement and would fundamentally alter how Vermont taxes non-resident property ownership.
The debate will likely center on several key trade-offs: the potential for new revenue to fund workforce housing and infrastructure versus the risk of destabilizing a reliable tax-exportation model; the administrative complexity of verifying vacancy versus the existing homestead declaration system; and the balance between making housing more affordable for residents while maintaining Vermont’s attractiveness to out-of-state investment that currently subsidizes education funding.
As the 2025 legislative session progresses, lawmakers will need to weigh these competing interests while addressing the underlying housing affordability crisis that motivated the proposal. The success of the existing purchase-time surcharge in generating above-forecast revenue suggests appetite exists among policymakers for exploring additional mechanisms to shift tax burdens toward second-home owners, though the specifics of any annual vacancy tax proposal remain to be drafted and debated.
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Categories: Housing
Yup, That’s their answer to everything ! A new, or higher tax !
Typical democrat socialist solution…tax someone else instead of actually fixing the problem that they originally created!!!
Very good explanation. I like your summary of things to watch out for at the end.
Now it is becoming clear that the Vermont Corporate employees, house, senate, GOVIE, and other groups are planning to drive out the other taxpayers that are not on the dole. We now have one big happy government family and your not in it.
Apparently this person doesn’t pay taxes. And there was another Sen. Martine Laroque Gulick (D-Chittenden (doesn’t know about taxes). How many more in Taxpelier don’t know? Total clueless carpetbaggers, Yup tax everything that crawls and breaths. They even tax the dead when getting buried (Townshend)..
VDC- Senator asks; Are property taxes really too high?
https://vermontdailychronicle.com/senator-asks-are-property-taxes-really-too-high/
Where is the brain power?
She does not worry about money Tom. She can afford her politics
And a darned nice smile, Mark. What’s not to like?…
How about a tax on vacant skulls?
Another spite tax proposal. A vacant home or a summer camp means that these folks are not using the resources of the State or the locality, year-round. These taxes are ideas generated by jealousy and nothing else. If home alarms are causing excessive police visits, by all means charge them for the call, but anything else is just a spite tax.
It will be a big savings when the owners sell the residence to a family with 5 school age children, ages 7 to 11, and 1 of which is handicapped! What they need to do is a line to line financial audit of organizations getting State money and deciding if they are really worth it and really needed.
does Bernie know about this?
Great Liars are they……notice how they leave out that Vermonter don’t pay the rack rate of taxes, as it’s based upon income.
They only want money and control. These people are insane.
Notice how incredibly creative they are in taxation? But they can find no, zero ways of reducing any taxes?
From RAM website : “We must provide temporary solutions for undocumented immigrants to be able to fully participate in our communities. In 2013, I led efforts in Vermont to allow undocumented immigrants to register for a drivers’ licenses, giving them agency and tools to travel to the doctor’s office, work, or the grocery store and will work to advance similar solutions in the State Senate.
Finally, we must reform our immigration system to invest in robust refugee resettlement programs to support displaced individuals across the globe and at home in Vermont “:…….. How amazing to learn how Ram is so deeply caring about immigrants and so uncaring about inflicting new taxes to second homes property owners which data suggest that a substantial amount is owned by residents within the state !
I’m a former primary resident 1992 to 2003, and have been an out of state second homeowners since. These taxes are killing me and I’m about done. I pay nearly 10,000 in Vermont for a 400,000 assessed value and less than 7,000 for a 2 million dollar value in MA. Both mortgaged. You’re driving me out as my monthy cost to maintain my vacation home is 2,000 per month without the mortgage. Unaffordable and killing anything I’m able to spend on Vermont’s local small businesses. Just supporting an out of control one party monopoly in Montpelier that is fiscally insane.
Just get it over with Kesha Ram Hinsdale, tax everyone for breathing.
Social capital = a civilization that helps one another. A term used to distort attention of a failing economy.
A Harvard study says we are ranked second in the country for something called social capital. Sounds great, but it would be even better if Vermonters actually knew what heck social capital is.
How VTDigger works
https://youtu.be/vArJg_SU4Lc
My goodness, I cannot think of a more short-sighted. Ill-advised proposal to perpetuate runaway spending while undermining an already unusually favorable non-homestead revenue structure for Vermont. Non-homestead properties do not place any educational demands on the state, they cannot be subject to income-sensitivity and they already pay full non-homestead education taxes into the system. Vermont should be so fortunate to export so much of its tax burden. One wonders what tax burdens would be like for fulltime residents in the absence of any second homeowners in this state at all.
Does Senator Hinsdale have the empirical data to support her conclusion that “individuals are ‘willing to pay more quietly and without much fuss’ when seeking property in Vermont’s high-amenity environment” or is she merely shooting from the hip? I would be VERY careful about making any elasticity assumptions given how dependent this state is on tourism and out-of-state visitors (homeowners or otherwise).
Additionally, how exactly will the state define vacancy and administer a verification process? Are we tracking cell phone data now? If someone uses their home for five months of the year but that home is ‘vacant’ for the other seven months, are we pro-rating this tax? What if a family needs to relocate for work reasons for an extended period of time?
If folks want to focus on the cost of housing and scarcity issues, I strongly suggest we start focusing on local and state zoning and permitting restrictions (i.e. – ACT 250), labor shortages and construction costs driven ever higher by ever more draconian code requirements. And if we want to meaningfully address runaway education costs, understand that we have a real demographics problem here in the state made all the more challenging due to high fixed overhead costs and per pupil spending decisions made at the local level with little to no fiscal accountability.
Personally, I think it’s time we repeal ACT 60 so we can recouple local spending decisions with local tax rates. It says something when a sitting senator seeking to find an additional source to tax has to carve out a constituency that has no representation in Montpelier. Clearly she knows state residents have already had enough.
Given how dependent our economy is on tourism and second home-ownership, I certainly hope none of our legislators are instigating or supporting this kind of nonsense.
So, I’m a lifetime resident of Vermont. I’m in my 70’s. Modest small house. I also own a small 2 bedroom camp that my husband totally redid into a very modest camp. It is located on a small lake, or Pond as it’s called. Upkeep is hard enough but now they are taxing me out of being able to afford it any longer. My husband passed 6 years ago. It is a 3 season camp. It would cost a fortune turn it into a year round home. All that garbage the State has come up with sounds great, if you aren’t trying to hang on to. I went from living a comfortable modest retirement, into watching and worrying about when the next tax bill comes. Selling seems my only option….is that fair?
Just another money grubber. They are going all out this session.
Personal Tax for all that are not paying property taxes… if not paid not able to vote on local budgets.
So they are proposing to send tax snoops to check up on if you are at home? How else would the proposed rules be enforced? How many new bureaucrats would they have to hire? Preposterous, unworkable, and unenforceable.
Marxism at its best STEAL from those that can’t fight back. Those people already pay for the terrible education system 38% more than Vermonters. Another propsal that defines logic. Did anyone ask her how this tax would help solve the housing problem? Dem/Marxist get ideas on how to steal our money then try to come up with a specious reason to support it.