The proposed bill S.104 seeks to overhaul Vermont's education funding system by transitioning from an education property tax to an education income tax, set to begin in fiscal year 2027. This new tax will be based on the income of all Vermont residents, including both homeowners and renters, with rates determined by locally voted budgets. The bill aims to eliminate the homestead education property tax while retaining a nonhomestead education property tax applicable to all properties except residential dwellings and their surrounding two-acre parcels. Key amendments include raising the income thresholds for property tax credits and introducing a new section for the education income tax, which will feature rates ranging from 2% to 8% based on adjusted gross income. Additionally, the bill mandates annual inflation adjustments and allows for district-specific rate adjustments based on per pupil education spending.

Further amendments clarify the responsibilities of municipalities regarding the nonhomestead education property tax and establish a new municipal property tax credit system, replacing the previous homestead property tax credit framework. The bill introduces the term "unadjusted property tax" and specifies that only one municipal property tax credit claimant per household is eligible for relief. It also outlines the process for claiming municipal property tax credits and sets a limit on the municipal property tax credit at $2,400. The bill modifies the Education Fund to include revenues from the new education income tax and specifies how these funds will be utilized, including payments required under the new renter credit. Overall, S.104 represents a significant shift towards a more streamlined and equitable taxation system for education funding in Vermont.

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