(The Center Square) — Vermont has repealed a controversial property tax rate increase cap in a move aimed at blunting the impact of rising school costs that were projected to lead to double-digit property tax increases.
The legislation, recently signed into law by Gov. Phil Scott, repeals an often-criticized property tax cap and will allow local school boards to delay budget votes in an attempt to lower education spending and property taxes.
Scott, a Republican, said the changes “are a necessary step as Vermonters face a projected 20% increase in property tax bills, and in some communities, it could be even higher.”
“But to be clear, this bill does not solve our property tax problem,” Scott wrote in a letter to lawmakers. “These changes will only reduce rates if school boards adjust their budgets accordingly and local voters support those changes.”
The new law repeals a 5% homestead tax rate increase cap and replaces it with a tax “discount” system limited to school districts that stand to lose their taxing capacity under the new pupil weighting system. The changes also allow school districts to amend their budgets and postpone votes on the spending plans in the hopes they will cut spending.
Most school districts plan to put budgets before voters on March 5, Vermont’s Town Meeting Day. It’s not clear if anyone will postpone those votes.
The Vermont Department of Taxes has estimated an 18.5% rise in property taxes next year, driven by a 12% increase in education costs. This includes teachers’ wages and health care benefits, rising costs for school building upgrades and funding for special education and mental health services.
Under the projected rate hikes, the actual average homestead property tax rate will have a tax bill increase from $1.54 for every $100 of property value in the current fiscal year to $1.80 in the fiscal year 2025, which begins July 1, 2024, according to the tax office. If the proposed increases go through, property taxes on a $250,000 home in Vermont would increase by about $650 in the next fiscal year, according to the Tax Department.
The Scott administration says a major driver of the property tax hikes is that many school districts have changed from the state’s pupil weighting system, which determines how education funding is distributed. Changes in pupil counts affect education tax rates based on per-pupil spending.