The Vermont Tax Department is forecasting a 12 percent increase in property taxes for the upcoming 2027 fiscal year, which makes for a total property tax increase of 41 percent over the past five years.
Vermont is heading toward a doom spiral in which tax increases reduce government revenues. Other states should take notice.
Rapidly rising costs of K-12 education in the state are the cause of the tax increases, Vermont authorities say.
In a letter to the Vermont House Speaker and Senate Pro Tempore on December 1, Vermont Department of Taxes Commissioner William C. Shouldice IV said the state’s education system is badly broken and wildly overpriced: “Vermonters are asked to pay significantly more, year after year, to educate fewer students. As the nation’s top education spender, our state’s considerable investment does not achieve the quality education Vermonters expect.”
While spending rose by $924 million over the past 20 years, enrollment fell by 16 percent, the letter noted.
Education spending in the state is rising much more rapidly than overall inflation, television station WCAX-3 reports: “Per-pupil spending is up nearly $1,000 over last year, about a 7% jump.”
The ever-increasing weight of property taxes in Vermont is concentrating more power among the wealthy and within government, Heartland Institute Research Fellow Jack McPherrin told me.
“As rising costs push families out, residential property increasingly transitions to institutional landlords, private investment firms, and financial entities that work closely with state regulators and have minimal ties to local communities,” McPherrin said. “Influence over land use and housing policy drifts toward actors aligned with public agencies instead of the people who live in these towns. The consequence is a diminished ownership class and an expanding population forced into long-term tenancy.”
By raising the cost of homeownership, these continual property tax increases lock younger people and low-income workers out of the housing market. The median age of a first-time homebuyer is now 40, up from 33 just five years ago. The median age of all homebuyers has risen to 59 years, up from 39 in 2010.
In Vermont, Gov. Phil Scott and state legislators propose to change the education funding structure and bring costs down by consolidating school districts and reducing staff and overhead. The proposed changes, however, would not take effect until 2029.
Even more importantly, those reforms do not address the real cause of the problem: special interest lobbies and the corrupting nature of property taxes themselves.
Property taxes are a highly reliable source of revenue, which is why states and localities like them. Taxes, however, should serve as charges for government services delivered to the individual from whom they are taken, in this case, the landholder, and only for those purposes. The rapid increase in property taxes is occurring because of ever-rising education costs, which are not services delivered to all those paying the taxes.
Elderly people, for example, receive little or nothing of value from public education. The same is true, of course, of younger, childless homeowners and of lower-income workers who tend to live in neighborhoods with the worst schools.
Local parents get “free” schooling for their children, though it is far less valuable than its cost to taxpayers, as evidenced by the woeful condition of government-run public schools. By far the greatest per-person value of public education goes to the people the system pays, especially the teachers' unions, and to the people those unions pay: politicians who determine school spending. That is the fundamentally corrupt system that drives up property taxes.
Education cost increases are caused by the very convenience and reliability of property taxes: States know they can get that money, so they target it to spend on their most vital constituents, those on whose votes and campaign contributions they count.
Underlying this process is the premise that people will not move out of the state and depress the tax base in response to the higher tax burden. The fact that this is exactly what is happening in multiple states, poorly run big cities across the country, and in Vermont itself suggests that the system’s attractions are worth only so much to residents, which accords with common sense.
“[T]he Census Bureau estimates Vermont has reverted to pre-Covid ways: losing more people to other states than it gains,” The Wall Street Journal reported earlier this year.
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The only solution to this inherently unfair system and resultant property-tax doom spiral is to make schools accountable for their outputs. The obvious way to do that is to send all state support for education directly to parents instead of government-run systems, as states across the country are doing through Education Savings Accounts and tax-deductible scholarship-granting organizations.
Vermont, however, is awful at school choice, with an index score of 1 in a range from 0 to 100 on the 2025 EdChoice Friedman Index, which measures the degree of education choice in each state.
School choice programs are essentially a roundabout way of reducing the power of teachers' unions, and the effect is likely to be temporary, lasting only until the latter manage to persuade politicians to force unionization on private schools.
Unless and until lawmakers ban public-employee union membership altogether, states will continue to hold all homeowners hostage in what are essentially forever mortgages that keep people under the perpetual threat of being foreclosed upon by armed state police.
This is widely considered to be a perfectly reasonable thing to do, because it is “for the children.” Stripping property from economically struggling people “for the children” just happens to benefit powerful public employee unions and the politicians they buy.
We used to call that corruption and demand that governments eliminate it. Now, policymakers and opinion leaders call it equity and demand more of it. Vermont exemplifies that change in attitude, a political transformation that places a devastating burden on the state’s working people and retirees.
S. T. Karnick (https://stkarnick.substack.com/) is a senior fellow at The Heartland Institute and author of the Life, Liberty, Property weekly e-newsletter.
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