Vermont Considers Higher Taxes on Second Homes Amid Housing Crisis
Vermont is grappling with a housing crisis characterized by a high vacancy rate and a struggling K-12 finance system. A proposed solution is a higher tax on second homes, aimed at addressing these intertwined issues. However, implementing this plan is complex due to the absence of a system to categorize vacation homes.
Currently, Vermont has only two property classifications for tax purposes: primary residences and everything else. The existing “non-homestead” category encompasses commercial properties, rental buildings, and seasonal homes, making it a catch-all classification.
Representative Emilie Kornheiser, chair of the tax-writing House Committee on Ways and Means, advocates for a more nuanced approach under the proposed education reform bill, H.454. This bill intends to introduce four property categories, including a specific classification for second homes. While the bill does not set different tax rates for these categories, Kornheiser believes a more detailed tax structure could make the system fairer.
Polls indicate strong public support for taxing second homes to lower residential property taxes, yet few states, primarily Hawaii, have successfully implemented such measures. The Vermont Department of Taxes warns that defining "habitable" properties could be subjective and administratively challenging.
Governor Phil Scott is cautious about the second home tax. He argues it shouldn’t be tied to education reform and believes second homeowners are already contributing significantly to local economies. Critics, including Senate Minority Leader Scott Beck, contend that focusing on taxing second homes won’t solve the housing supply shortage in the state.
The Senate will soon consider the education reform bill, and Kornheiser plans to pursue discussions on second-home taxation. However, final decisions may hinge on the governor’s approval, as Democrats lack the votes to override a potential veto.
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