Vermont lawmakers and taxpayers are once again confronting (or failing to confront) the reality of rising property taxes. In general, the least disruptive taxes are those that apply low, stable rates across a broad base with minimal complexity or unpredictability. Taxes designed this way tend to be easier for residents to plan around and reduce the economic distortions that occur when rates vary dramatically across jurisdictions or change unpredictably year to year. Predictability and simplicity allow taxpayers and local governments to make long-term decisions with greater confidence.
Unfortunately, Vermont’s property tax system looks very different from that model. According to the Tax Foundation, Vermont ranks 50th in the country for property tax structure, reflecting a system widely viewed as complex and inconsistent across communities. Instead of a predictable structure, taxpayers often experience large fluctuations driven by school spending decisions and local valuation adjustments.
Vermont finances its public schools primarily through the state’s Education Fund, which is supported by a state-wide property tax. However, the tax rate applied to each district is not uniform. Rather than setting a single predictable rate, the state adjusts each community’s tax rate largely based on how much that district spends per student. When spending increases, the effective tax rate for that district rises as well. The formula also incorporates local property values, meaning the same spending decision can produce very different tax outcomes in different towns. As a result, two neighboring communities can see dramatically different property tax increases in the same year depending on how their school budgets or assessment ratios differ.
At this year’s Town Meeting Day, approximately 82% of school budgets were approved and only nineteen were defeated. While those rejected budgets helped reduce the projected statewide property tax increase from roughly 12% to about 7%, that still leaves a significant amount of new revenue to generate.
To help ease the burden on families, rather than addressing the structural drivers of spending, the Vermont House recently approved a proposal to offset tax hikes through a distribution of the Governor’s $105 million Education Fund transfer across two fiscal years (FY27 and FY28). The transfer, funded with dollars from the state’s General Fund, functions as a temporary property tax buy-down. While this approach will reduce tax increases in the short term, these buy-downs can add to fiscal pressures in later years when the temporary funding runs out. Spreading this year’s funds across two years may buy more time, but it does not change the underlying spending trajectory.
Temporary funding infusions also weaken the connection between local spending decisions and the tax burden those decisions generate. Communities that approve higher budgets may not immediately experience the full financial impact of their decisions at Town Meeting if statewide transfers absorb part of the increase, reinforcing the trajectory of spending levels even as Vermont already spends roughly $27,000 per student, one of the highest levels in the country.
Since the late 1990s, public school enrollment in Vermont has fallen by more than 25 percent, but education spending has continued to rise dramatically. To address the upward pressure on property taxes caused by education spending growing faster than the revenue base that supports it, the legislature passed Act 73, which, among other reforms, introduced a Uniform Statewide Education Property Tax Rate and a student-centered weighted funding formula to determine how education funds are distributed. However, if House bill H.955 becomes law, implementation of that formula would be delayed until 2030, postponing potential structural improvements to the system.
Continuing to fuel spending increases that do not clearly improve outcomes is not good for taxpayers or for Vermont’s students. The question, then, is how Vermont can improve educational outcomes while maintaining sustainable costs.
Our recommended approach is to introduce greater choice, competition, and flexibility within education systems. When schools operate in an environment where families have options, schools must compete to attract and retain students. That competition encourages greater efficiency, innovation, and responsiveness to family needs. Policies that expand education freedom (such as open enrollment, Education Savings Accounts, or other school choice mechanisms) can introduce the kind of competitive pressure that encourages more effective use of education dollars.
Legislators must balance three goals: maintaining high-quality educational opportunities, ensuring predictable and sustainable property taxes, and giving families meaningful choices around how their children are educated. As Vermont continues to grapple with rising property taxes and growing education costs, policymakers should focus on reforms that create a more predictable funding system while expanding educational options that can improve outcomes and help bring costs under control.
Vermont’s rising property taxes are not simply the result of short-term budget decisions. They are the predictable outcome of a system where spending continues to grow even as the number of students declines. Continuing to patch over these pressures with temporary tax buy-downs that delay reform postpones difficult legislative conversations at the expense of the taxpayer. A more durable solution requires re-aligning incentives so that education funding reflects fiscal realities while meeting student needs. By implementing the foundation formula as intended and expanding education options that introduce competition and flexibility into the system, Vermont can begin to control costs while improving outcomes. Taxpayers deserve a system that is predictable and sustainable, and families deserve an education system that prioritizes results over arbitrary spending increases.
