The 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. 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 income thresholds for property tax credits and introducing a new top marginal tax rate on income to offset revenue losses from these changes, thereby enhancing equity and providing tax relief to lower-income residents.

Additionally, the bill amends various sections of Vermont tax law to clarify tax liabilities for nonresident individuals and streamline the administration of the education income tax, which will be assessed similarly to the personal income tax. It introduces provisions for withholding requirements based on federal adjusted gross income and mandates that individuals, estates, and trusts file a Vermont personal income tax return if they meet certain income thresholds. The bill also repeals outdated provisions related to homestead property tax credits and exemptions, focusing instead on a simplified municipal property tax credit system. Overall, the proposed changes aim to modernize the tax framework, improve clarity, and enhance the efficiency of tax administration within the state.

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