• Muddy waters
    May 04,2014

    The rejection of 35 school budgets by voters on Town Meeting Day persuaded some legislators that they had to do something to contain school costs. But they had it wrong. In rejecting those budgets, the voters had already done something. That is how our system is designed to work.

    By forcing school boards to go back to the drawing board and find ways to reduce their budgets, people in nearly three dozen towns had enacted the very limit that legislators erroneously believe is the responsibility of the Legislature. And the effect of those rejections will not be limited just to 35 towns. The looming threat of voter rejection has been hanging over the heads of school boards all across the state, which have done a good job of containing budgets through these last few difficult years.

    Much confusion about taxes and education has been muddying debate in Montpelier this year.

    Rep. Johannah Donovan, chairwoman of the House Education Committee, is quoted as saying, “I think it’s pretty clear that the system we have right now cannot be sustained financially. To address that, we’re going to have to become larger districts, so we can share resources and teachers.”

    First, it’s not exactly clear that the system is unsustainable. What other enterprise in business or government is able to restrain spending over the years by 3-4 percent? The number of students is dropping, which suggests that budgets should also drop, but buildings are not getting smaller. Nor is it true that we can suddenly decide to do without second-grade teachers.

    The second part of her statement has a surface reasonableness to it, but it doesn’t make sense. Share teachers? Does that mean the second-grade teacher in Calais is going to get in her car and teach a second shift in Plainfield? We already share teachers when necessary and practical. Music and art teachers commonly move from school to school. Nor has anyone identified areas where larger school districts can enforce the kind of cuts that would achieve meaningful savings. There are only vague promises about efficiencies.

    There are other sorts of confusion about taxes. A bill passed by the House last month would create an education income tax. The idea is to take pressure off the property tax. The income tax is progressive in that it takes more from the wealthy and less from the rest. The property tax is regressive in that it takes a larger percentage of income from middle-income and poor people than it does from wealthy people.

    We divide up our revenue sources in different ways because different taxes behave differently and have different effects. The property tax is more or less stable year to year, while the income tax fluctuates more dramatically as economic conditions change. Thus, the property tax provides a good steady stream upon which schools can rely.

    Yet the regressive character of the property tax puts a burden on middle-income taxpayers, creating a reason to shift school spending to the income tax. The trouble is that when one tax rate gets excessively high, it can send the message that the state is overtaxed. Also, the property tax draws revenue from out-of-staters who own property in Vermont but who pay no income tax here.

    Most significantly, the income-sensitive provisions of the present system already protect middle-income taxpayers by introducing progressivity to the property tax. It is not an income tax, but property-tax payers get a break based on their income. Where is the imperative for change?

    Beside that, if the Legislature wanted to introduce an education income tax, all it would need to do is to increase the General Fund contribution to the Education Fund. The General Fund draws from the income and sales taxes.

    Another reason for the Senate to be skeptical about creation of a new education income tax is that the income or payroll taxes are likely to take a major hit in the next couple of years when the state introduces its new single-payer health care plan. Gov. Peter Shumlin has been slow to unveil a plan for financing that system, but it’s hard to see how a higher income or payroll tax, or some combination, won’t be required.

    Shumlin will have to sell that tax hike by showing how it will be offset by the elimination of health insurance premiums. It is a tradeoff that makes sense, but it will still be a hard sell. If the income tax were already under pressure from an extra demand for education revenue, taxpayers might be reluctant to drive the income tax even higher.

    Legislators seem compelled to do something — anything! — to fix education this year. But they have failed to define the problem clearly or to match it with a reasonable solution.

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