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.

Updating The State’s Grand List 

The consistency and accuracy of the statewide grand list is a critical element to a high quality tax system, especially when funding education with a statewide fund. We ask a lot of town listers to maintain the grand list, and many towns struggle to find qualified people who are willing to do the regular work as well as regular reappraisals.  Add to that the fact that the small number of parcels in each town (average of 1,300) is not attractive to outside firms who prefer to work on contracts with 10,000 parcels or more, and Vermont is having a difficult time keeping grand lists current across the state. 129 towns are currently under contract to have town-wide reappraisals (with dates stretching out to 2030), and another 39 have yet to enter into contracts.  

The Department of Taxes made several recommendations in their December 2024 report (“Statewide Reappraisals and Property Data”) to update the reappraisal system to achieve a six-year reappraisal cycle and ensure that properties in every town are fairly valued in a timely manner.  They recommended establishing larger “assessment districts” of 10,000 parcels or more, hiring professional assessors to take the place of listers, moving the grievance/appeal process to the regional level, and moving the due date for grand list dates up to 1 January from April to give towns more time for appeals before tax bills are sent out after 1 July.

The Ways and Means Committee has a committee bill that incorporates the recommendations of the Department Taxes and plans to move elements of it this legislative session.  There is great interest to have the ability to tax non-primary residences at a different rate than primary residences and we are building an administrative system to enable this flexibility and precision in the future. 

School Funding

In the spirit of collaboration, the legislature has spent the last month reviewing the Governor’s education proposal. This has taken time because the proposal is light on details, and details matter for our children, our communities, and our taxpayers. The administration has proposed massive changes in the way we fund, govern, and deliver education, and we owe it to our children and our taxpayers to take the time to get this right.

The Governor’s proposal would replace our current education funding system with one based on a foundation formula. Instead of voting for local school budgets and requiring the state to adjust property tax rates each year to generate enough revenue to fund the budgets, the Governor’s plan would assign a base funding amount to each student. Students living in low-income households, English language learners, those attending small schools, and those attending schools in sparsely populated areas would receive additional “weights.” For example, a student living in poverty, would receive an additional weight of 1.3 and so would count as 2.3 students in a school’s pupil count. A school district would receive an education payment equal to the base funding amount multiplied by its weighted number of students. The state would set a uniform statewide homestead and non-homestead property tax rate to raise funds to make the education payments. Districts could choose to operate within the base funding amount or they could ask their voters to approve a small amount of additional funding by raising local property taxes.

The framework of a foundation formula has some advantages over our current system. There could be more predictability for taxpayers about their tax rates, and the system could ensure that schools are funded more equitably than in our current system. However, the details of the design of the foundation formula are critical. If we get them wrong, some schools could end up with too little funding and be forced to make large cuts to important programs while others could have more funding than they can put to use efficiently.

After weeks of testimony, it has become clear that the Governor’s proposed foundation formula is based on a hypothetical “prototypical” school system that does not reflect Vermont’s current reality. There are significant gaps in the proposal regarding funding for things like nutrition, special education, transportation, school renovations, and more. The proposed formula assumes class and school sizes that do not exist in most parts of the state and would take years to replicate. At the same time, it is not clear how the Governor’s proposal would save taxpayers money. The Ways & Means Committee is working with these same ideas but looking deeply at the details and national best practice to develop an education funding system that is fair, sustainable, and flexible enough to adapt to future changes in our education governance and delivery systems.

Property Tax Credit 

A large majority (88%) of the questions posed to the Taxpayer Advocate are about the Property Tax Credit.  It is a complex credit that is intended to lower the property tax bills paid by Homestead owners according to their income and limited by the value of their property, and the credit is earned in one calendar year and then applied to the next property tax year.  Many Homestead owners (59% ) receive some Property Tax Credit, a decrease from previous years in which 67-70% of Homeowners qualified for the credit.  The Ways and Means Committee is considering a number of proposals that would simplify and/or expand the Property Tax Credit to keep more money in Vermonter’s wallets: 

• Governor’s proposal that would establish a uniform property tax rate and create a homestead exemption, subject to income limits.  The proposal would simplify the administration of the Property Tax Credit, and would benefit those with low property values and low income.  

• Raising the income limits and property values to the existing property tax credit.  This idea is to adjust the income limits to what was established in 1997 and has not been adjusted since.  It also raises the current cap on the value of the property from $400,000 to $1 million to give tax relief to those property owners who have experienced market inflation but have not seen increases in their income.    

Lastly, the committee is looking at equitable ways to use one-time surplus funds in the General Fund to “buy down” statewide property taxes for FY2026.  The committee will continue to take testimony on the impact on future years of this proposal, and need to determine how it factors into the transition plan in education spending.  

Other Tax Relief

The Ways and Means Committee will be taking more testimony before taking a vote on three key tax relief proposals. All three of these proposals are long standing Democratic or non-partistan priorities to allow Vermonters to keep more money in their wallets and make our tax system fairer.

• Increasing the Earned Income Tax Credit (EITC) for low income tax filers without children to 100% of the earned federal EITC.  The EITC for claimants with children is 38% of the federal amount, with income limits set according to the number of children, but a maximum of $68,675 to qualify.  For claimants without children, the maximum income limit is $26,214.  The proposal is to increase the refundable credit from the current 38% of the federal amount to 100%, with the maximum increasing from $247 to $649.  This is estimate to cost the state $3 million in additional money.  

• Increasing the Child Tax Credit by increasing the age of qualified children from age 5 to age 6.  Approximately 27,000 children are claimed under the Child Tax Credit.  The $1,000 per child is a refundable credit, available to households with less than $125,000 in income.  The credit phases out over that amount and is not available to households earning more than $175,000.  Most (92%) of households in Vermont qualify on an income basis, though just 21,000 tax returns applied for the credit (only those with children…).  The total cost of this program is $28.5 million, the second largest tax expenditure of the state.  

• Increasing the Income Tax Exemption for Social Security by $5,000 for all categories of tax filers.  This will exempt Social Security income from taxation when the tax filer’s income is less than $55,000 for individual tax filers or $70,000 for joint filers.  The exemption is phased out over the next $10,000 in income for both.  The majority of people who receive Social Security income pay no taxes on that income under current law. This change will keep pace with inflation and add $2.1 million in income tax exemptions to Vermont taxpayers.