Bill H.177 proposes a major overhaul of Vermont's education funding system by replacing the education property tax with an education income tax starting in fiscal year 2027. This new tax will be based on the adjusted gross income of all Vermont residents, including homeowners and renters, with rates determined by locally voted budgets. The bill aims to eliminate the homestead education property tax while retaining the nonhomestead education property tax on all properties except residential dwellings and their surrounding two-acre parcels. It also seeks to update property tax credit income sensitivity measures to provide relief to a wider range of taxpayers by fiscal year 2026. The bill introduces a new subchapter titled "Education Income Tax," which details the tax structure for various taxpayer categories and establishes a renter credit based on gross rent paid.

Additionally, the bill amends various sections of Vermont's tax code to clarify definitions and regulations surrounding personal, corporate, and education income taxes. It introduces new language regarding taxpayer residency, modifies the definition of "homestead," and repeals outdated provisions related to education property tax calculations. The bill also mandates that revenue from the nonhomestead education property tax be deposited into the Education Fund and clarifies that municipalities' liabilities for this tax will not be reduced by early payment discounts. Furthermore, it raises income thresholds for municipal property tax credits and specifies the calculation process for these credits, ensuring that low-income households receive appropriate relief. Overall, the legislation aims to streamline tax administration and enhance compliance among taxpayers.

Statutes affected:
As Introduced: 32-5841, 32-5851(1), 32-5851, 32-5852(a), 32-5852, 32-5861, 32-5820, 32-5401, 32-5402, 32-5402b, 32-5404, 32-5405, 32-5406(c), 32-5406, 32-5409, 32-4111(e), 32-4111, 32-4261, 32-5400(c), 32-5400, 32-6061, 32-6062, 32-6063, 32-6064, 32-6065, 32-6066, 32-6066a, 32-6067, 32-6068, 32-6070, 16-4001, 16-4025, 32-435(b), 32-435