March 30, 2003

Vermont's Act 60 Dilemma

As Vermont struggles with how to fund its K-12 education system, proposals to use the sales and use tax and/or the income tax to supplement or replace the property tax have generated considerable interest. I favor continuing primary reliance on the property tax because it is relatively stable, albeit with some dificulties in fair administration and statewide property value appraisal.

Heavy reliance on the income tax, already too high, will drive mobile Vermonters away. Sales and use taxes hold some attraction, but they can vary substantially with the economic cycles.

The legislature must think long and hard about proposing radical changes, particularly without any coherent overall tax strategy for the state.

As important as the revenue source is cost control. We cannot afford a continuation of the 40% increase in education spending, whatever the drivers, that we experienced between 1997 and 2002. These increases are not sustainable. Left unchecked, they, along with escalating costs of health care, will create an unsustainable demand for revenue and surely dampen economic development and job growth.

No comments: