answering questions 2

[Carolyn Branagan]

While reading some of the more recent posts, I came across a thread in which school funding was being discussed. The following should help clarify how our state’s school funding system works:

The state's Education Fund is filled from several sources including 1/3 of the sales tax, 1/3 of the purchase and use tax, the tax on the nuclear plant, lottery proceeds and a transfer from the General Fund. The biggest contributor to the Education Fund is the property tax.
 
For purposes of collecting school tax, the state recognizes two kinds of property: homestead property and non-homestead property. The tax rates for these two kinds of property are set in law at $1.10 for homestead and $1.59 for non-homestead. Almost every year since 2004 there has been enough money left in the Education Fund to lower these rates so property owners don't have to pay tax at the full rate. For last year the legislature lowered the rates to 87cents for homestead property and $1.36 for non-homestead. This year the legislature has voted to lower each rate by one penny, 86 cents and $1.35. At the end of the year the rates will revert to $1.10 and $1.59 and stay there unless the legislature has enough money to lower them again.

A homestead declaration form needs to be filed EVERY year in order to get the homestead classification along with the lower statutory tax rate. Don’t forget to fill out and sign this form with your Vermont Tax return. Non-homestead property never has to pay for school expenses above the base education, this year $8,210. The tax on non-homestead property is the rate times assessed value. If a community chooses to spend more than the base amount per pupil then the homestead tax rate rises accordingly. The average FY2009 per pupil spending in Vermont is $11,607 which is 141% above the base rate of $8,210. That makes the average tax rate $1.23. I am proud that both communities in my district spend well under the state average. They are proof that excellent, well-run schools can be achieved for less than the current state average.

The state does not keep a statewide Grand List. Act 68 changes the Grand List into two parts, one for municipal taxes and one for school taxes. The school tax Grand List assesses two kinds of properties, the homestead properties and the non-resident properties. Local listers establish value, and the state Property Valuation and Review office uses a complicated method to equalize land value across the state, called the Common Level of Appraisal. Communities here in the Champlain Valley have been hit hard in recent years by the CLA because of our sharply rising land values. So although it is good that our equity in the property we own has increased, it is bad that our tax burden has risen accordingly.
 
There is a system which allows Vermonters with incomes lower than $90,000 to pay school taxes based on their income. Most Vermonters use this method to pay for school taxes. They get a tax credit for the house and up to two acres of land and the credit shows on the property tax bill reducing the amount due to the town. Forms for the income sensitivity program are included in the Vermont income tax return booklet.
 
The Common Level of Appraisal is the state's method of making sure all property in the state is assessed at the same level. Responsibility for maintaining the Grand list rests with local town listers. The Vermont Tax Department conducts an equalization study annually by looking at data from sales and comparing it to the assessed value. Statewide land values continue to rise, though not at fast as they have in recent years. On a statewide basis, in FY 2007 values increased 13.5%, in FY2008 they increased 12.2% and this year FY2009 values have increased 9.7%. Next year in FY2010 values are predicted to rise 5.3%.

After local voters decide how much to spend on their schools (usually at town meeting), the state sets a tax rate. If the amount the voters decide to spend is the state per pupil average, and land values are assessed at a statewide average level, then the tax rates will be at the statewide tax rate, this year it is 86 cents. If the amount is more or less than the statewide per pupil cost, the  homestead tax rate goes up or down. Non-homestead property rates only fluctuate  from the CLA, not the amount of the budget.

Act 60/68 turned property taxes into a state tax, but did not change them from being property taxes. I hope this review is helpful. Contact me if you want to know more.  cbranagan@leg.state.vt.us

Rep. Carolyn Branagan
Franklin-1, Fairfax/Georgia
Vermont House of Representatives

[slpott]

I just have a question that bothers me to no end. A person owns 10 acres with a 4 bdr house and garage on it vs. a person owning 10 acres with a 4 bdr trailer on it. The owners makes the same amount of money. Owner "A" with a house likes to stay at home and spends money on home improvements. Owner "B' could care a less about their home but spend their money on travel, cloths and fancy cars or whatever suits them. Why does the person who is materialistic and makes home improvements pay more than the person that likes to travel and has other prioritiies. I find that very unfair. Maybe you can clerify that for me? I have 2 kids and I have no problem paying taxes but a 10 acre lot of land should be a 10 acre lot of land. I doubt very much that the 10 acre lot down the road from me that looks terrible is charged that same tax rate. If they were, I guarantee they would sell it. I would also guarantee that I would buy it so I do not have to look at it. What is the encouragement for keeping up the property and what makes the big difference in taxes? Sorry if I am not making sense but I know nothing about this kind of stuff. Thank you for your opinion. Shelly

[Carolyn Branagan]

Shelley,

Your question makes a lot of sense. From the situation you describe the difference would be in the value of the house versus the value of the trailer. You're right, upkeep affects parcel value. The homestead is the dwelling plus 2 acres; the rest is treated as 'land'.  So the point of difference, if I understand your example is the value of the dwellings. There has always been discussion on the value of a mobile home compared to a house. The value for Grand List purposes is determined by the town listers based on comparables..... I think the state has guidelines for them to use.  These values aren't just pulled out of a hat, a lot of effort goes into establishing a fair value. The value is never realized of course unless the owner decided to sell the property. 

Remember that most Vermonters pay school taxes based on income, using the income sensitivity method. Any household making under $90,000 qualifies for some kind of help paying school taxes with this method. It doesn't matter what the money is spent on, only that it is income. If the taxpayer chooses to pay school taxes based on property value times the tax rate, then the upkeep of the property is very important because it certainly affects value.

I hope this is helpful.

from, Carolyn

[slpott]

Carolyn:
Thank you for your quick response. I understand it, although, I do not think it is fair. I guess that is why it is cheaper never to finish anything and make it look nice. There are always ways around it, however, I do not choose to live like that so, therefore, I pay for it. I can also say this, you deserve every meal you eat and should not have to answer to the public for it. It amazes me that people can respond and make comment on someone that spends the majority of the time away from their family, routine and home. I would never be able to walk in those shoes so I really can't complain. It is not an easy job and I give credit to those that can take the rath. Thank you for all you do, Shelly

[Carolyn Branagan]

Thanks. I appreciate your kind words. I love my job as state representative and do my best.

from,  Carolyn