Education (School Funding)

H 177 proposes replacing Vermont’s education property tax with a new education income tax starting in fiscal year 2027. It would tax all Vermont residents’ income (both homeowners and renters) using progressive rates based on income brackets, with rates adjusted per school district according to local education spending. The bill eliminates the homestead property tax benefit for homeowners while continuing the renter credit and updating property tax credits to provide broader relief for taxpayers by 2026. This directly affects all Vermont residents through their state income tax filings, shifting the funding mechanism for public education from property-based to income-based.

Vermont's S.104 would replace the current education property tax with an income-based education tax starting in 2027, eventually applying to all residents (homeowners and renters) by 2030. The bill eliminates the homestead property tax but keeps nonhomestead tax on non-residential property, while creating new renter credits against the income tax and adjusting property tax credits to provide broader relief for lower-income households. It also establishes a new top income tax rate to offset revenue losses from these credit changes. The bill is currently in the Finance Committee after its first reading on February 28, 2025.

This bill would allow all Vermont students in pre-kindergarten through 12th grade to attend any public or approved independent school of their choice, regardless of where they live. It establishes a "School Choice Grant" funded by redirecting existing education funds that would have gone to the student's home school district to the chosen school. Schools must accept students unless they lack capacity (using lotteries for oversubscription), and cannot deny enrollment based on protected characteristics. The bill also requires a report by the Joint Fiscal Office by 2026 on integrating this program into Vermont's overall education funding system.