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 for all properties except residential dwellings and their surrounding two-acre parcels. It also continues to provide the existing renter credit and updates property tax credit income sensitivity measures to offer relief to a broader range of taxpayers by fiscal year 2026.

The bill introduces new legal language that establishes a subchapter on the education income tax within Vermont statutes, detailing the tax structure, rates, and administration. It clarifies definitions and regulations surrounding personal, corporate, and education income taxes, including residency status and the definition of "homestead." Additionally, it repeals outdated provisions related to education property tax calculations and mandates that revenue from the nonhomestead education property tax be deposited into the Education Fund. The bill also outlines the process for notifying property owners of changes in appraised values and adjusts income thresholds for municipal property tax credits, ensuring a streamlined and transparent property tax process for 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