Advocacy Update – Week 14 – 2024

Yield Bill Would Raise Property Taxes, with Bigger Increase for Business and Renters 

(4-minute read)

With votes still happening across the state and some budgets even failing, the House Ways and Means Committee has what they need to move forward with the yield bill, which sets the statewide property tax rate, this year. 

• Currently, 27 failed, 3 defeated again, 65 passed, 17 late votes, and 6 rewarned budgets add up to about $192 million in additional expenses. 
• The yield bill envisioned some major, necessary changes over the next two fiscal years, however, it has since been scaled back due to pushback from colleagues, as well as associations of school administrators. 

As we write this, many elements of the proposed yield bill are imploding, however, what is almost certain is the non-homestead rate will be increased to 18.57% which will be a $1.449 tax rate while the homestead yield is 15.54%.

• This represents a shift of $25 million to the non-homestead payers which includes businesses and renters, due to non-homestead dollars subsidizing the property tax credit, which income sensitizes homeowners.  
• The Lake Champlain Chamber testified, imploring the Ways and Means Committee to not to utilize the non-homestead rate to buy down the homestead tax rate. 
• LCC reminded the Committee that In testimony from their colleagues, consistent trends have been not to buy down rates and to tie voters’ decisions to their tax rates more closely.
• The proposal to raise an additional $25 million from non-homestead payers is counter to these two ubiquitously agreed-upon goals expressed in this session. 

The Big Controversy: 

The bill, as drafted earlier this week, would push Vermont to what could be referred to as a foundational funding system in which the state education fund guarantees districts with a base payment per student, or “educational opportunity payments.” From there, the legislature drives down the yield number to make getting a statewide education fund dollar, which requires more dollars from local homestead property taxpayers.

• The Vermont Principals’ Association, Vermont Superintendents Association, Vermont School Boards Association, and Vermont Association of School Business Officials pushed back on this concept because they fear that local voters would vote down more school budgets. 

Other Components of the Bill: 

• The bill will certainly contain a tax on any internet-based service that is not already taxed, including anything from websites to QuickBooks. We covered this last week. 
• The bill likely contains a “net asset attestation,” which would preclude those of high value yet with low income from accessing the income sensitivity program. 
• The Committee is still considering the creation of a short-term rental surcharge, though not at the previously considered 10%, and more likely at around 1.5 to 3%. 
• The bill considers a “variable excess spending threshold” similar to the allowable growth rates in Act 46.
• Also contemplated is new language that would standardize ballot language for school budgets. 
• The Committee has wrestled with a way to prevent schools from drawing down statewide dollars to their local budgets which then end up in reserves, something that may not be remedied this year. 
• The Tax Department shared a slide deck regarding the steps being taken to address CLA transparency and volatility, including moving to a 6-year reappraisal cycle.
• The Education Committees plan to include language in the yield bill to create a non-legislative task force of education experts and stakeholders. This task force will be charged with defining the goals and vision for public education in Vermont and mapping out a timeline and process for redesigning the education system and its financing.