Scott administration projects ‘unacceptable’ 18.5% increase in property taxes

By PETER D’AURIA

VTDigger

Published: 12-02-2023 2:51 AM

The Vermont Department of Taxes is projecting a whopping 18.5% increase in residents’ property tax rates, a spike that Gov. Phil Scott quickly seized on Thursday to call for lawmakers to address the state’s “affordability crisis.”

That eyebrow-raising forecast is not set in stone. Lawmakers generally set property tax rates in the spring, and as more information about school budgets and tax revenue emerges over the coming months, those projections are likely to change at least slightly.

But the new figures, released in a Thursday letter by Tax Commissioner Craig Bolio, are still likely to unnerve taxpayers.

“For Vermonters and policymakers concerned about property taxes, housing affordability, or overall tax burden, this letter should sound a major alarm,” Bolio wrote.

According to the letter, for every $100 of property value, the actual average homestead property tax rate is expected to climb from $1.54 in the current fiscal year to $1.80 in fiscal year 2025, which begins July 1, 2024.

The average non-homestead rate — which covers properties that do not serve as an owner’s residence — is expected to climb from $1.60 in the current fiscal year to $1.86 for every $100 of property value.

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The homestead rate varies from town to town, depending on local spending on school districts. The non-homestead rate is not pegged to local school budgets but does reflect local property value appraisals.

About two-thirds of Vermont homestead taxpayers receive an income property tax credit, meaning their homestead property tax rates are based on income, rather than the value of their property. The average income tax rate is expected to increase from 2.33% in the current year to 2.67% in the upcoming fiscal year.

If the projections come to pass, property taxes on a $250,000 home would increase by about $650 in the next fiscal year, the letter said.

Bolio’s annual missive to lawmakers — called the Dec. 1 letter, but released a day early this year — includes projections about the state of the education fund, which pays for local school budgets, and the state property taxes that fill it.

The estimated tax increases are due largely to a projected 12% jump in education spending, a figure that Bolio said he believed to be unprecedented.

“I do not believe that in the history of the December 1 Letter there’s ever been anything as large as 12%,” he said in an interview.

That expected increase is due to several factors, Bolio said in the letter: inflation, the expiration of federal pandemic aid, and a roughly 16% increase in health care costs and payments on school construction or renovation projects.

In an interview, Bolio added another factor, Act 127, a law passed last year that is intended to direct more funding to school districts that need it more.

That law is expected to push up education spending statewide, although its exact impact remains unclear. The law includes a provision stipulating that year-over-year equalized tax rate increases (meaning increases before a property value appraisal system is factored in) are capped at 5%.

The tax department expects most of the school districts in the state to hit that 5% increase cap, meaning the rest of the money will be made up from the districts that don’t hit that limit.

In a statement released along with the letter, Gov. Phil Scott said the projected tax increase was “not acceptable” and called on the legislature to take action.

“Put simply, a nearly 20% property tax increase would hurt Vermonters and our economy, and we cannot let it happen,” Scott said. “At a time when housing costs and interest rates are elevated, higher property taxes will make our housing and workforce crises worse, and I sincerely hope the Legislature agrees.”

Ashley Moore, a spokesperson for Senate President Pro Tem Phil Baruth, D/P-Chittenden Central, said Thursday afternoon that Baruth had not yet had time to read Bolio’s letter.

Conor Kennedy, a spokesperson for House Speaker Rep. Jill Krowinski, D-Burlington, referred a reporter to Rep. Emilie Kornheiser, D-Brattleboro, who chairs the tax-writing House Ways & Means Committee.

“We have a really long, proud tradition in Vermont of supporting our public schools because our children are worth it and our teachers are worth it,” Kornheiser said in an interview. “And so seeing the decrease in federal money this year, but still seeing really, like, enormous needs in our schools, it makes sense that we would see education spending go up.”

Kornheiser also noted that the projections in the letter are far from final.

“There are always opportunities for both new revenue into the (education) fund and opportunities to move things in and out of the ed fund,” Kornheiser said. “So there’s a lot of policy levers available to us.”