Let me be clear: I value holding onto my money as much as anybody. I brown-bag, buy in bulk, and browse for products on sale.
And I wish my taxes were lower. For the record, we pay almost $6,600 on a Middlebury home assessed at about $250,000. Property tax relief doesn’t really help much, if at all, depending on fluctuations in one of our incomes.
But I understand I live in a college town and county seat. And in a rural state without a lot of industry. There are taxation issues in Vermont that no amount of reform, gnashing of teeth, or magic pixie dust is fully going to fix.
That doesn’t mean our lawmakers should not do everything they can to make our system as fair as possible, or our state and local school officials should not make the state’s education as cost-efficient as possible and our schools as effective as possible.
While they are doing so, though, it would be better if they were surrounded, as the saying goes, by more light than heat.
One recurring theme from some property tax reform advocates is that those who are eligible for property tax relief do not have enough “skin in the game.” That contention injects more smoke than substance into the debate.
I have seen that phrase in a local email chain, in letters to the paper and in comments on statewide education articles, and have heard it at school board meetings. It has become a talking point.
One can argue that renters do not have enough skin in the game. In my days as a landlord, I had to fill out Renter Rebate Forms. The amount actually devoted to taxes in rent boiled down to just hundreds of dollars per unit, far short of what property owners pay.
But the argument I keep hearing is that those homeowners who are paying based on their incomes, not on the value of their properties, aren’t pulling their weight — and because they do not have to pay full freight on their property taxes they blindly support school budgets.
As a letter-writer to this paper put it, “I do not know how many households pay little or no school tax but it is probably a considerable number. This is a classic case whereby a well-meaning law removes the incentive for citizens to take part in government accountability.”
Well, facts for 2014 may be found at the Vermont Department of Taxes website, specifically at www.state.vt.us/tax/pdf.word.excel/statistics/2014/property_tax_adjustme….
One useful chart summarizes Addison County’s property tax adjustments by income range.
First, let me explain the “Circuit Breaker” the document cites. Vermont has a program that caps all property taxes at a maximum of 5 percent for households with incomes of $47,000 or less.
The most a family making that amount or less will pay in taxes, including municipal levees, is $2,350. Please note, however, that still is 5 percent of the household’s income going just to property taxes.
I find it hard to believe that paying 5 percent of one’s income in property taxes is “no skin in the game.” According to the data, a little more than 6,000 Addison County residents qualified for the Circuit Breaker program in 2014, with taxes ranging up to that $2,350.
Personally, I’d rather have our still modest income and pay our tax bill. Regardless, the number of property owners paying “little or no school tax” basically equals zero.
Also, those who regularly mention, as another letter-writer did, that the Circuit Breaker applies to those “seniors with fixed incomes.” Taxes are fixed, too, for elderly folks making less than $47,000. And income sensitivity helps those making more unless those fixed incomes are near or above six figures.
Moving up the income ladder, the Department of Taxes 2014 numbers show there were 1,146 county residents with incomes between $47,000 and $59,999 who received prebates averaging $1,423.
Their tax bills averaged $4,126, meaning those households paid property taxes that averaged about $2,700 ($4,126 minus $1,423). That net tax amount divided by the high end of the income range equals 4.5 percent — they paid 4.5 percent of their income in taxes. Many in all these examples probably paid a higher percentage.
Next, 1,194 county households with incomes between $60,000 and $74,999 received prebates averaging $1,264.
Their average tax bill was $4,616, and therefore those folks’ net tax bill averaged $3,352. Again, dividing that amount into the highest end of that income range gets a result of about 4.5 percent.
On the next rung, 879 households with incomes ranging from $75,000 to $89,999 received prebates averaging $1,207.
Their average property tax bill was $4,852, and the resulting net average tax bill equals 4 percent of the highest income in the range.
The last category, between $90,000 and $97,000 in Addison County, contains 551 households who got back an average of $74. The highest incomes in that range paid about 6.5 percent of their income on property taxes, using the same math.
Meanwhile, a household in Panton (I picked that town because of its tax rate of almost exactly $2) making twice the median income can afford a $415,000 home. That household would owe $8,300 in taxes, or almost 5.8 percent of its income.
So the system is mildly punitive for those at the top of the income scale or just over the cut-off point.
But would anyone out there trade those higher incomes and property tax payments to move further down on that data chart?
Regardless, to argue that folks who pay at least 4 percent of their incomes on property taxes have “no skin in the game” simply is not accurate.
One could argue, however, looking at that data, that a different combination of income and property taxes might make more sense.
Andy Kirkaldy may be reached at [email protected].