Business groups and realtors urge caution as Vermont bill would expand property tax classes

Amy Spear, president of the Vermont Chamber of Commerce, told the Finance Committee that the chamber supports education finance reform but urged caution on expanding property tax classifications in H.454, saying more categories would add complexity, revenue volatility and administrative burden.

"Any reform to our property tax system should prioritize simplicity, predictability and fairness across the board," Spear said. She recommended postponing or scaling back the expansion of classifications and consolidating similar categories, such as merging nonhomestead apartment and nonhomestead nonresidential into a single nonhomestead class, to reduce complexity and protect competitiveness.

Spear provided context on Vermont’s tax burden in testimony submitted to the record, noting the state ranks high nationally in per-capita property taxes and urging the committee to avoid changes that would worsen affordability for residents and businesses.

Peter Tucker, director of public policy and advocacy for the Vermont Association of Realtors, questioned the need for multiple new classifications. He said broad-based, uniform taxes are generally a fairer way to raise revenue and warned that splitting the base risks diluting the tax burden and increasing controversy over tax policy.

"The purpose of taxes is to raise needed revenue, not to favor or punish specific industries," Tucker said, and urged the committee to keep the homestead/nonhomestead framework or, if a rental category remains, to use clearer language such as "nonhomestead residential rental" to describe single-family rental houses as well as apartments.

Both witnesses told the committee they support measures to make valuation cycles more regular and predictable, but differed on whether the bill’s proposed classification expansion is the right route. Spear said the chamber favors the new foundation formula for school funding but recommended delaying added tax classifications until a comprehensive review examines effects on revenue stability and education cost-containment. Tucker said accurate, current valuations are beneficial to real estate markets but that the proposed additional tax classes should be removed from the bill.

Committee members pressed witnesses on trade-offs between simplicity and policy targeting. One lawmaker noted that differentiated classifications can be used to promote objectives such as encouraging housing or discouraging absentee second-home ownership; witnesses responded that those policy goals should be weighed against system complexity and administrative cost.

The submissions and oral testimony asked the committee to consider three near-term reforms if classification changes proceed: consolidating similar nonhomestead categories, adding a mandatory periodic review of classification impacts, and providing clearer, simpler category names and guidance for taxpayers.

The committee did not take a vote during the hearing. Witnesses asked the Legislature to provide additional guidance and stakeholder review before moving forward with new classification rules.