April 24, 2003
Education property tax:
Repeals the local share education property tax.
Creates a statewide education tax on a split grand list, with a rate of $1.59 for nonresidential property, and a rate of $1.10 for homestead property.
The $1.10 homestead rate increases as local spending increases. Spending in excess of 125% of the statewide average is double-weighted when increasing the $1.10 tax rate.
The homestead is no longer limited to 2 acres; it includes entire parcel.
Removes the $15,000 exemption in income sensitivity, and caps adjustment at $5000 per year; increases dependent income exclusion to $6500; excludes homeshare participant income from calculation.
Increases rate to 6% in 2004; reduces the rate to 5.5% on July 1, 2007.
Extends the tax to beer and soft drinks, beginning 2004. Telecommunications tax rate is made uniform with general rate.
Amends sales tax law to allow Vermont to join the Streamlined Sales Tax Agreement.
Extends local option sales tax from 2004 to 2008.
Property transfer tax:
Rate on nonresidential property is raised from 1.25% to 1.75% July 1, 2004.
Common level of appraisal:
Removes extreme anomalies from calculation of CLA.
Encourages school consolidation through additional state construction aid.
Reduces statewide property tax rate to $1.07, increases yield to $45.20; increases block grant to $5651.00.
Sections 1 and 2 repeal the local share education property tax. Begins with fiscal year 2005.
Secs. 1, 2. Delete local share education property tax language. These sections now simply require districts to vote a school budget and report the information to the commissioner of education.
Sections 3 and 4 create a statewide education tax on a split grand list, with a rate of $1.59 for nonresidential property, and a rate of $1.10 for homestead property. The $1.10 rate increases as local spending increases. Begins with fiscal year 2005.
How the $1.10 homestead tax adjustment works: District spending over a base amount of $7000 results in a proportional increase in the $1.10 homestead tax rate. Spending in excess of 125% of the statewide average is double-weighted when increasing the $1.10 tax rate.
Sec. 3. Amends the homestead definition to include the entire parcel surrounding the dwelling, without regard to any road intersecting the property, and to include any non-commercial outbuildings.
Defines “excess spending” as per-pupil spending (minus approved school construction spending) which is greater than 125% of the statewide average per-pupil spending. (A transition rule makes this 135% in FY05, 130% in FY06, and 125% in FY07 and after.)
Defines “district spending adjustment”, which is the greater of 1 or the ratio of:
(a) the district’s spending per pupil plus excess spending, over
(b) the base education payment ($7000 in FY05).
Sec. 4. Sets the statewide education property tax rates: nonresidential rate is $1.59; homestead rate is $1.10, multiplied by the district spending adjustment.
Requires the commissioner of education to determine the town’s net education tax payments to the state, and allows towns to retain 1/8% of the total education tax collected.
Requires the commissioner of taxes annually to recommend a reduction in the statewide education tax rates for the next fiscal year only, assuming a 5% stabilization reserve in the education fund, and assuming 34% of education spending will be paid from the nonresidential tax.
Sec. 5. Requires residents to declare ownership of a homestead annually by April 15, with the income tax return, beginning in 2004. The tax department then notifies town listers of the declarations, for verification by the towns by June 1.
Sec. 6. For homestead tax adjustment, provides that household income will not include any income of a person living in the household under a homesharing agreement.
Also provides that payments under a homesharing agreement may not be counted as rent for purposes of claiming a rebate.
Sec. 7. In the household income definition, increases the amount of income which a dependent may receive and which the claimant may exclude from household income. Currently the exclusion is $4000.00; the proposal would increase the exclusion to $6,500.00.
Sec. 8. In income sensitivity chapter, removes a reference to “local share property tax”, and adds a definition of “claim year”.
Sec. 9. Amends the formula for calculating the homestead property tax adjustment to match the new tax system, and removes the $15,000 homestead exemption.
Caps total adjustments and credits at $5000.00 per claimant, per year.
Sec. 10. Makes changes necessary for homestead property tax adjustments and tax rates in the town of Vernon.
Sec. 11. Changes “local education spending” to “education spending”.
Defines the new baseline or “base education payment”, which is $7000 per pupil in FY05, increased by an inflation factor in future years.
Defines the “adjusted education payment” as the district’s education spending per pupil.
Sec. 12. Changes terminology specifying how education payments are made to districts.
If a district spends less than the base amount per pupil, it will still receive 40% of the difference between its per pupil spending and the $7000 base amount.
Maintains payments for Vermont Academy of Science and Technology, and for the adult diploma program, at current levels, indexed for inflation.
Requires the commissioner of education to calculate 125% of the statewide average district spending per equalized pupil each year.
Sec. 13. Maintains technical education payments at current level, indexed for inflation.
Sec. 14. Eliminates the annual calculation of the yield, and updates terminology.
Sec. 15. Updates terminology and eliminates language which is now covered by section 5402 under Title 32.
Sec. 16. Requires the commissioner of education to publish a comparison of student-teacher ratios in similar schools.
Sec. 17. Eliminates references to local education spending and local share taxes.
Sec. 18. Updates terminology.
Sec. 19. Maintains small schools grants at current levels, indexed for inflation.
Secs. 20 - 25. Updates terminology in various sections of Titles 16 and 32.
Sec. 25a. Describes legislative intent with regard to sales tax.
Secs. 26 – 29. Raise the sales and use tax rate to 6%, beginning January 1, 2004. Makes the sales tax on telecommunications the same as the general rate of 6%.
Secs. 30 – 32. Reduce the sales and use tax rate to 5.5%, beginning July 1, 2007.
Sec. 33. Repeals the $20.00 per month residential user credit for telecommunications sales tax.
Sec. 34. Defines “soft drinks” for sales tax.
Sec. 35. Applies sales tax to beer and soft drinks, beginning January 1, 2004.
Sec. 36. Increases the property transfer tax on nonresidential properties from 1.25% to 1.75%.
Secs. 37 - 42. Amends the education fund to simplify the revenue sources. Requires the general fund transfer to grow at the same rate as the general fund grows.
Components of the education fund would be:
statewide education property tax;
general fund transfer, indexed for growth;
electric generating plant tax;
lottery and Powerball revenue;
one-third of the purchase and use tax;
one-third of the sales and use tax;
Sec. 43. Provides a rule for determining a district’s long-term membership, for purposes of education funding, if the district has experienced a sharp rise in student count (more than 20 students over the prior year). Instead of the average over the prior two years, the commissioner uses 80 percent of the actual one-year increase, to a maximum increase of 45 equalized pupils.
Sec. 44. Clarifies the law governing the tax increment financing district for Winooski, to specify the date for determining the tax increment base.
Sec. 45. Provides that in the annual equalization study, extreme values called “outliers” shall be ignored if they would create undue distortion of the common level of appraisal.
Sec. 46. Encourages school consolidation by increasing state construction aid from 30% to 50% for projects that consolidate uses of buildings or involve a joint contract district project.
Secs. 47 - 61. Amend the sales and use tax laws to conform to the multistate Streamlined Sales Tax Agreement, to allow Vermont to participate at such time as the agreement becomes effective nationally.
Vermont’s participation would mean that catalogue and internet sellers who are not required to collect our sales or use tax may register voluntarily to collect the taxes for Vermont. The “remote” sellers have been reluctant to collect sales taxes while state sales tax laws have varied so widely. The agreement imposes uniformity on all participating states’ laws, and thus “streamlines” the sales tax for these remote sellers.
Sec. 62. Extends the sunset on local option sales tax from 2004 to 2008.
Sec. 63. Creates an education quality study.
Sec. 64. Creates an education cost containment study.
Sec. 65. Creates a grand list issues study.
Sec. 66. Creates an education tax study.
Sec. 67. Creates a property tax adjustment study.
Sec. 68. Provides a transitional rule for estimating the total nonresidential and homestead value in each town, only for purposes of calculating each town’s total education tax liability for fiscal year 2005, in the interim until the homestead declaration program is established.
Secs. 69, 70. Fiscal year 2004 provisions: reduce the $1.10 statewide rate to $1.07; increase the yield to $45.20; increase the general state support grant to $5651.00.
Secs. 71, 72, 72a. Appropriations and transfers:
Sec. 71. Transfers $20.7 million from the general fund to the education fund for FY04; sets the general fund transfer for FY05 from the general fund to the education fund at $263.5 million.
Sec. 72. Appropriates $1 million to the tax department for implementation of the bill provisions.
Sec. 72a. Creates two new attorney positions in the office of the Secretary of Administration, to assist school districts with special education matters.
Sec. 73. Effective dates.
Prepared by Emily Tartter
April 24, 2003