A proposal that would cap income sensitivity on state and local property tax at the first $425,000 of assessed value would impact approximately 150 taxpayers in Warren, Waitsfield and Fayston.
The proposal, which has passed the Vermont House, is currently in committee in the state senate.
State Representative Adam Greshin explained that the proposal, which passed the House, was part of larger proposal from Governor Jim Douglas that included a $400,000 cap and additional measures such as reducing income sensitivity to people who earn between $70,000 and $90,000. Under Vermont's current education funding system, people whose household incomes are under $90,000 qualify for income sensitivity, up to $8,000 on their house and two acres (known as a homestead).
With state budget shortfalls, the administration and Legislature have
been working on ways to reduce the growing cost of income sensitivity,
which currently caps state education taxes at 2 percent of household
income. Many people pay more than 2 percent, however, because local
education spending that is higher than the state average per pupil
spending increases local taxes exponentially.
When the bill came before Greshin last month, he amended the $400,000 property appraisal cap to $425,000. Even at that rate, he said, he had doubts that it was the solution to controlling education costs and taxes.
"Many people live in what have become expensive homes, especially in ski towns, and they may not have comparable incomes. That was my biggest concern. But we have to address the fact that income sensitivity has grown every year, the cost of it. One way to fix that is to reduce the subsidy," he said.
"When Act 68 was passed to fix problems with Act 60, income sensitivity put the maximum amount of tax for education at 2 percent of household income. That percentage has been reduced every year and is now at 1.8 percent. When you add back in the impact of local spending, the number is closer to 2.5 percent of household income. When we looked at how other states provide property tax relief we found that the elderly and the very low income were receiving property tax subsidies and that Vermont has been subsidizing more people and at higher income levels than other states," he said.
Greshin said that his research into the impact of the $425,000 cap on local taxpayers showed that the median homestead value in Warren and Waitsfield was $334,000 and in Fayston it was $370,000. Averages in those towns were a bit higher with Fayston averaging over $400,000 and Warren and Waitsfield average about $350,000.
There are approximately 170 households in the three towns that would be impacted by the $400,000 cap and about 155 impacted by the $425,000 cap.
"And those are not necessarily people who qualify for income sensitivity. But if you take a guess, based on average household income per town, 65 percent of homesteaders are receiving income sensitivity," Greshin said.
"So two-thirds, or about 100, of the 150 or so households, would be affected by this cap," he said.