Vermont needs new framework to fund education — Robert Finn

If Vermont is to develop an economic engine to support high paying jobs, and be a place where talented people choose to live and work and raise children, we must correct the distorted tax scheme that funds our public education.

As UVM Professor Art Woolf pointed out in the Burlington Free Press on May 4 and July 26, “income sensitivity” allows almost 70 percent of Vermont taxpayers to pay based on a percentage of their income, not the value of their property. These taxpayers receive a “prebate” amounting to $185 million, or almost 12 percent of the annual education budget. This $185 million is added to the tax burden of the slightly more than 30 percent of taxpayers who pay based on their property value.

When Act 60 was passed 20 years ago, the prebate was intended to protect people on fixed incomes and farmers whose high property values didn’t generate enough income to support education taxes. At the time the income threshold to qualify was about $70,000. Soon after, legislators saw prebates as an incentive to pass education budgets and the threshold was quietly raised until, now, households earning as much as $140,000 are eligible for some form of “income sensitivity.”

Art’s insights explain that those who get the prebate have little incentive to limit spending on education, which is a reason why Vermont’s spending per student is $18,000 versus the national average of $11,000. I would like to take his thesis a step further and predict where this flaw in Vermont’s system has us headed.

Our tax base is shrinking because those paying property taxes to fund education are retiring and qualifying for “income sensitivity,” or moving to lower tax states. Meanwhile business leaders are moving high paying jobs out of Vermont because of our unbalanced education tax structure. As this tax base shrinks, education costs are spread over fewer people, further increasing its property tax burden in an ever-tighter spiral.

Until the Vermont legislature restores fairness and balance to how education is funded, unsustainable school budgets will be passed and taxpayers and jobs will leave the state. Let’s take the corrective steps needed before it is too late.

Robert Finn

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