Do Vermonters have a high tax burden?


Are Vermont’s taxes high?

Yes and no. It depends on the tax.

According to the Tax Foundation1, Vermont’s total tax burden of 10.45% is the 9th highest in the nation.

But to respond to that news with the mantra that we must cut taxes is too vague and of little use other than a political slogan. When you pick apart the tax burden, you see huge differences in which taxes put the big dents in our wallets.

It’s not the income tax. Again, according to the Tax Foundation, Vermont’s total income tax burden (combining federal and state income taxes) is 25th highest in the nation, putting us right in the middle of the pack.

How about the sales tax? The Tax Foundation reports that in 2014 Vermont ranked 34th in the nation in sales tax rates. Our sales tax burden is well below the national average.

Do you wince every time you pull up to a gas pump and see the listed price? How much of that goes to the state and how does Vermont compare to the rest of the US? The Tax Foundation tells us that Vermont taxes gasoline at 26.7¢ per gallon, giving us the 23rd highest rate in the nation.

If we rank 25th in income taxes, 34th in sales tax and 23rd in gasoline tax, how do we end up ranked 9th in total tax burden?

The answer is the property tax. The news is bad no matter how you slice it.

If you look at property taxes in terms of percentage of median home value, Vermont comes in 9th highest at 1.59%.2

In 2011 Vermont was 5th highest state in property taxes per resident.

It gets worse. If you consider property tax as percentage of income, Vermont ranks 2nd highest at 10.5%.
Ironically, some of the problem lies in Vermont’s strong housing market. In 2012 Vermont’s median home value was $216,900 compared with the national median of $171,900. From 2007 to 2012, homes values in Vermont increased 5.6% while in the nation they decreased by 11%. Prudent Vermont lenders and frugal homeowners avoided the housing crash and are paying for it with a higher property tax burden.

Our property taxes are too high and we deserve relief.

And that is largely a local issue, since the bulk of property taxes are set by each community to pay for schools and municipalities. This is one tax over which local voters have some control.

What is the answer?
It’s easy to say to cut taxes, but that is too simplistic. If you had this problem with your household budget, you would look at two approaches: cut expenses and increase income. The second is harder to do than the first. And when you cut expenses, you make hard choices in deciding what you can do with less of or even without.

You have the same two options with property taxes, but there is also a third: redistribution. We can look at where to cut, and we can explore bringing more money into the community. We can also explore finding other ways to fund our schools, pave our city streets, and provide other municipal services. It takes will and creativity on the part of our managers and local boards. The people will have to make the final decisions with their ballots.

Voters should also look at their property tax bills to see the split between the school tax and the municipal tax to see which one is costing them more. In Barre City, the split between the school and the municipal portions of the property tax is interesting and unique. In 2011, Barre City ranked 266th in per pupil spending.3 Spaulding High School was dead last. That is reflected in the relatively low school tax rate on the bill. Barre City’s municipal tax was the 3rd highest in the state.4 The property tax burden in our community is lopsided on the side of the municipality.