Bill S.104, introduced by Senator Vyhovsky, proposes a significant overhaul of Vermont's education funding system by transitioning from an education property tax to an education income tax starting in fiscal year 2027. The new education income tax will apply to 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. Key amendments include raising household income thresholds for property tax credits and introducing a new tax structure with rates ranging from 2% to 8% based on adjusted gross income. The bill also seeks to provide broader relief to taxpayers through updated property tax credit income sensitivity measures and a new top marginal tax rate to offset revenue losses.

Additionally, the bill amends various sections of Vermont tax law to clarify tax liabilities, particularly for nonresident individuals, and establishes new withholding requirements for both the education income tax and Vermont income tax. It introduces the term "municipal property tax" in place of "education and homestead property taxes," streamlining the tax code and focusing on municipal responsibilities in tax assessments and collections. The bill also includes provisions for a new renter credit against the education income tax and repeals outdated definitions related to homestead property tax credits. Overall, S.104 represents a comprehensive restructuring of Vermont's education tax system, emphasizing clarity, efficiency, and a shift towards an income-based funding model.

Statutes affected:
As Introduced: 32-6066, 32-5822, 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, 32-6066a, 32-6067, 32-6068, 32-6070, 16-4001, 16-4025, 32-435(b), 32-435, 32-5962