SUBJECT: Official Statement of the Governor on House Democrats’ Proposal to Create a New Income Tax for Education

Note: The Brattleboro Reformer today published a report outlining an effort by House Democrats to create a new income tax for education. Governor Jim Douglas issued the following statement in response:

In March, I expressed concerns about disconcerting signs—including a commitment from Speaker Symington herself—that the House majority would pursue an income tax hike.

The Speaker and other supporters of the Democrats’ new income tax for education will no doubt argue that increasing our income taxes will somehow reduce the tax burden. Vermonters know better than to accept such a claim from the same people who gave us Act 60 – along with a promise that it would lower property taxes. Frankly, claiming that higher income taxes will result in a lower tax burden is misguided at best.

As Vermonters know all too well, we don’t have a revenue problem, we have a spending problem. If we do not address the root of the problem by allowing the property tax caps passed last session to have the desired effect, our taxes—whether income or property—will increase year after year with no relief in sight.

There are many reasons why we cannot afford to raise income tax rates.

For example, according to the Legislature's own joint fiscal office, there's no way to transfer to an income-based system to fund education without significantly increasing the income tax on middle-income Vermonters.

Besides being unfair and regressive, placing more of an income tax burden on low and middle income families would also slow growth in our economy, undermine our economic security and threaten the prosperity of future generations. Middle income earners need real relief from our tax burden—the highest per capita in the country—not the shell game proposed by Democrats.

Income tax rates are also one important measure used by employers to determine where they will locate and where they will create jobs—Vermont’s are already among the highest in the country. The Democrat proposal to increase the income tax burden would result in the creation of fewer good paying jobs.

By the Democrats’ own admission, the current system is already structured to allow most Vermonters to pay their education taxes based on income. In fact, a document produced recently by the House Ways and Means Committee and released by legislators notes, “Since Act 60, the majority of Vermonters can pay school taxes on the basis of their income. In addition, for decades, as in many other states, total school and town property taxes have been capped for low income Vermonters.”

Shifting how we pay for education from one pocket to another is not a solution to our problem, it will only make our spending problem worse by increasing the capacity of Montpelier’s tax-and-spend majority to raise both the property tax and the income tax in the future.

As I said in my inaugural address in January, any proposal to increase income taxes on Vermonters is completely unacceptable and entirely unnecessary. I will not support a new or higher income tax for education—period.

Instead, Vermonters can count on me to propose a set of real reforms to provide immediate relief from the property tax while we implement the property tax caps passed last session. I urge the Legislature to embrace this more responsible course.