Ways and Means Committee

The House Committee on Ways and Means considers matters relating to the revenue of the State, and which shall report the amount of taxes necessary to be raised for the support of the government and inquire what measures, if any, ought to be adopted, the better to equalize the public burdens, and otherwise improve the financial concerns of the State, including all matters relating to taxation, local or otherwise, and all matters relating to the grand list, and other similar policies.

For the last two years, the House Ways and Means Committee has focused on: 

Affordability - Making Vermont more affordable, especially for families with low and moderate incomes

Sustainability - Building a path to a more sustainable education funding system that will help our public schools deliver the services our children need at a price taxpayers can afford

Fairness - Making our tax code fairer for Vermonters across the income spectrum

Navigating changes to the Federal Tax Code - Protecting Vermonters, Vermont businesses, and state revenues from changes at the federal level while maximizing the ability to access to the federal tax credits and supports that do exist.

Tax credits and free filing assistance/affordability:

Last year we expanded Vermont's Earned Income Tax Credit and Child Tax Credit, both of which will help Vermonters with low and moderate incomes.

Last year, lawmakers expanded Vermont's Earned Income Tax Credit and Child Tax Credit. If you work a low-wage job and don't have children, you may be able to get up to $400 more a year in refundable credits as cash back when you file your taxes.  If you have a child under seven, you may be able to get up to $1,000 back per child. You might also be eligible for a credit on your property taxes when you file your homestead declaration. Remember, you likely don't need to pay to file, Vermont has volunteer tax preparers all over the state, ready to help you. Go to TaxCreditsVT.org for more information about Vermont's anti-poverty tax credits and how to file for them.

Annual Yield Bill:

What follows are paragraphs drafted by members of the Ways and Means Committee describing their perspective on H.949/Act 169 (An act relating to homestead property tax yields). This bill is NOT good for Hartland, Windsor, or West Windsor, mostly because it will impose excessive fines to our school districts due to exceeding an excess spending threshold. We have little control over the costs that take us over these arbitrary thresholds. The issue extends beyond our legislative district and encompasses much of Windsor County. Almost every Windsor County legislator (House and Senate) voted against this bill.

H.949/Act 169 (An act relating to homestead property tax yields), the non-homestead property tax rate, and technical changes to education finance) is the annual bill that provides funding for schools and sets property tax rates. Spending on our schools and children is one of the best ways we can use our resources. It is an investment in our children’s wellbeing, our democracy, and our economy. The majority of our education dollars get spent locally on good union jobs. Our statewide education fund means we’re all in this together. School districts and towns decide their budget each year and then we all chip in to pay for our schools in one big fund. 

Despite the best and sometimes drastic efforts of our school districts, education spending is growing faster than non-property tax revenues (sales tax, etc.), so property taxes need to increase to make up the difference. The spending growth cannot be attributed to any one cost, but is a mix of special education, healthcare costs, mental health costs, inflation, and infrastructure needs. In this year’s yield bill, we are able to offset tax increases for Vermonters by making a one-time transfer from the general fund.

These are difficult issues. School staff is working hard to teach our children to learn and grow; school boards are working hard to govern our districts; our system is fragile; and our property taxes are too high. We have a path forward to strengthen our schools and communities, and to lower taxes, but we need to manage the next three years before the foundation formula and accompanying tax changes take effect. There is no perfect solution in the short term to meet the revenue needs of our schools.

In this year’s Yield Bill, we directed $4M of a general fund transfer toward enhancing the renter credit for next year and increasing the income threshold for the property tax “circuit breaker” from $47,000 to $50,000 - the first change in that threshold in decades. As a result, Vermonters with lower incomes will see higher tax credits or lower property taxes in the coming year. Because of the work of school boards across the state to tighten spending, and our agreement to use one-time funds, average property tax bills across the state are expected to increase by 3.5% next year, a considerable improvement from the 11.9% projected back in December. We give older Vermonters, Veterans, and low-income property owners greater assistance by increasing the limits for the “circuit breaker” tax credit for the first time since 1997 and provide renters with larger renter credit during an inflationary time when rent increases are outpacing wage increases. These are unstable times and property taxes will likely stay challenging while we implement long-term changes in our property tax system. This yield bill sets us on a path towards that change.  Know that we are committed to doing everything we can to stabilize and lower Vermonters’ property tax bills this year while maintaining essential public services and quality, public-education opportunities for our children. 

Property tax reform and education reform/sustainability and affordability:

Last year we passed Act 73 (An act relating to transforming Vermont’s education governance, quality, and finance systems) which began the transformation of Vermont’s education governance, delivery, and finance systems to build a system that works better for children, communities, and taxpayers. This year, we passed H.955/Act 170 (An act relating to next steps in transforming Vermont’s education system), the bill that takes the next steps in the transformation of our public education system, and H.949/Act 169 (An act relating to homestead property tax yields), both of which continue our work on making our education financing system more sustainable. After we listened to Vermonters and the Redistricting Task Force that was formed under Act 73, the legislature designed Act 170 to incorporate more local control over mergers and create a framework for lowering education costs through a shared services model called Cooperative Educational Service Areas (CESAs). Districts will be required to make a good-faith effort to merge with neighboring districts, but local voters will have the final say on whether mergers move forward. CESAs are required to be set up across the state with assistance from the Agency of Education and will provide services like special education, professional development, and administrative support. The CESAs should help districts lower costs by providing certain services in a more efficient way and improve outcomes by sharing best practices.

Act 170 also includes the next steps in the implementation of the tax policy that was created in Act 73. Over the next few years, it is hoped that Act 170 will make our education finance system more equitable, sustainable, and affordable by:

- shifting from a property tax credit system that has provided relief to fewer and fewer households over the past several years to an exemption system that will support a wider spectrum of household incomes and property values

- implementing regional assessment districts to make sure every municipality is reappraising properties at least every six years so that property taxes are spread fairly across the state

- moving to a foundation formula for education funding in which the state uses a standard per-pupil calculation to determine how much funding each school district will receive versus the current system of funding locally passed budgets–guaranteeing resources to students regardless of their zip code.

- implementing a tax on second homes that will raise additional revenue for our school system and relieve pressure on homestead and business taxpayers

In addition to Act 170, this year’s Yield Bill contained provisions to reduce the excess spending threshold. This year’s yield bill incorporates a plan to gradually lower that threshold - to 115.5% next year, 114.5% the following year, etc. – as a way of providing a ramp to the estimated amount districts will receive under the foundation formula (implementation scheduled for FY 2030).

Federal tax changes:

The Reconciliation Act (H.R.1), passed by the Congress last summer, made many changes to corporate and personal income tax laws. By tradition, Vermont links up many definitions of personal and corporate taxable income to the federal definitions each year. However, this year, many of the changes made by the Republican administration in Washington would have catastrophic impacts on Vermont’s state tax revenue. We made careful decisions about where Vermont might be better off decoupling from this administration’s policies so we have enough revenue to continue to provide the services Vermonters expect while supporting our small businesses. The result is a fairer tax system for all of us.

More detail on navigating changes to the Federal Tax Code:

The House Way and Means Committee spent weeks taking testimony to understand the potential impact of the tax provisions in the One Big Beautiful Bill Act (OBBBA) - a.k.a. the One Huge Awful Bill - on state revenues and Vermonters’ household bottom lines. H.933/Act 164 (An act relating to miscellaneous administrative and policy changes to the tax laws) contains provisions that selectively link or decouple Vermont’s tax code from the federal tax code. These choices made by the legislature help Vermont businesses access bigger tax deductions and credits for research and development, help families access larger child and dependent tax credits, and provide other tax breaks for Vermonters. At the same time, by increasing taxes on international income earned primarily by non-Vermont corporations operating in Vermont, the selective linking and decoupling in Act 164 will increase revenue for the state by an estimated $15.3M in fiscal year 2027 and $16.6M in fiscal year 2028. The bill passed the House and Senate, and was signed into law by the Governor on 18 June 2026.

Wealth tax consideration:

This year, the House Ways and Means Committee considered legislation to support the critical needs in our state, including healthcare and education, by expanding progressive taxation, and raising taxes on the wealthiest Vermonters. 

Income inequality and the wealth gap is one of the most important issues of our time. The committee heard countless hours of testimony regarding the very real affordability crisis so many of our constituents are facing. People are being priced out of healthcare plans, seniors on fixed incomes struggling to keep up with unsustainable property tax increases, working families living paycheck to paycheck and unable to keep up with grocery and fuel price increases. Meanwhile, the federal government continues to give tax breaks to the wealthiest among us, including cutting taxes for large corporations. 

Over the final weeks of the session, the House Ways and Means Committee was weighing two proposals:

- lowering taxes for low- and middle-income Vermonters 

- expanding healthcare access and affordability for people who lost their Affordable Care Act subsidies due to the Trump Administration

Both proposals were paid for by raising income taxes on the top 1% of income earners in Vermont, and levying additional taxes on unearned/investment income. 

These are extremely important policy initiatives that will have long-term consequences on our state revenues, and affect the lives of tens of thousands Vermonters. There are many significant outstanding policy questions. There was not enough time in this legislative session to fully consider how to address these difficult issues. The legislature is committed to continuing this conversation in January during the next legislative session.