Last week’s lesson introduced three typical Vermonters — a teacher, a landlord, and an investor — as they were visited by the Big Bad Tax Man. Let’s see how the taxman’s takings fit with the balance sheet of property and income of our three.
| Teacher | Landlord | Investor | Total | ||
| Property Value | |||||
| Property, house | $300,000 | $300,000 | $300,000 | $900,000 | |
| Property, other | $0 | $0 | $1,000,000 | $1,000,000 | |
| Property total | $300,000 | $300,000 | $1,300,000 | $1,900,000 | |
| Income | |||||
| Income, wages | $60,000 | $60,000 | |||
| Income, capital growth | $40,000 | $40,000 | |||
| Income, rents | $60,000 | $60,000 | |||
| Income, Social Security | $60,000 | $60,000 | |||
| Income total | $60,000 | $60,000 | $100,000 | $220,000 | |
| 1040 AGI income | $60,000 | $6,003 | $30,000 | $96,003 | |
| Taxes | |||||
| Vermont Property tax | $5,100 | $2,000 | $5,100 | $12,200 | 1.7% of value |
| Rebate | $0 | $0 | $2,000 | $2,000 | |
| Net property tax | $5,100 | $2,000 | $3,100 | $10,200 | |
| Federal income tax | $7,200 | $720 | $3,600 | $11,520 | 12% of AGI |
| Social Security tax | $4,800 | $0 | $0 | $4,800 | 8% of wages |
| Total Federal tax | $12,000 | $720 | $3,600 | $16,320 | |
| Vermont income tax | $3,600 | $360 | $1,800 | $5,760 | 50% of Federal |
| Vermont sales tax | $2,000 | $2,000 | $2,000 | $6,000 | $2000 per family |
| Total Vermont tax | $10,700 | $4,360 | $6,900 | $21,960 | |
| Total Taxes | $22,700 | $5,081 | $10,500 | $38,281 |
From our Three little Vermonters, the State and Federal governments collect about $38,000 per year, most of it from the teacher. (A similar burden would apply to an office worker, a small business owner, a firefighter, a carpenter, a technician, a cook, anyone who earns their income in wages.) That’s a heavy tax burden, heavier even than in the progressive countries of northern Europe.
It’s no wonder these middle-class families — the kind we need to strengthen Vermont’s economy and society — find our state unaffordable and its tax burden inequitable. And it’s no wonder that we see a growing influx well-to-do retired folks and real estate speculators moving into our Green Mountain State: they enjoy significant tax advantages.
Between them the three own $1.9 million of property, and receive an income of $200,000. Yet Vermont collects only $10,000 from that property each year (most of it from the teacher), an overall rate of one-half of one percent. And from their income it collects $5760 (again, most of it from the teacher), an overall rate of about 3%. The effective Vermont tax rates for our three are:
| Property tax rate | Income tax rate | |
| Teacher | 1.7% | 6.0% |
| Landlord | 0.6% | 0.6% |
| Investor | 0.2% | 0.2% |
Perhaps Vermont is overtaxing some of its citizens, and undertaxing others.
Next week’s lesson will propose a simpler and fairer way to collect the funds that Vermont needs to operate its schools and highways and other necessary functions of government. A proposal that would reduce the tax burden for most Vermonters.