An act relating to increasing taxes on higher income earners and creating the School Construction Aid Special Fund
H.794 proposes a broad tax package aimed at raising revenue from higher-income households and certain property owners. It would create a new personal income tax surcharge on individuals with federal adjusted gross income above $250,000, with a higher surcharge on income above $500,000, and it would also establish a new “wealth proceeds tax” on individuals, estates, and trusts with income above specified thresholds. The bill defines “wealth proceeds” largely by reference to federal net investment income rules, but expands that base to include certain gains and income items that are otherwise excluded, and it applies the tax in addition to existing Vermont income taxes.
The bill also restructures education property taxation by creating new classifications for homestead, nonhomestead nonresidential, nonhomestead residential, and nonhomestead seasonal property. Under the proposal, nonhomestead residential property would be taxed at a higher education property tax rate than homestead property, and half of the revenue from that category would be directed into a new School Construction Aid Special Fund. That fund would support school construction aid, facilities planning grants, capital construction administration costs, and emergency aid, with projects funded through the account subject to prevailing wage requirements. The bill further states that revenue from the income tax surcharge and wealth proceeds tax is intended to support Green Mountain Care financing requirements.
If enacted, the bill would amend multiple titles of Vermont law, including income tax administration, property tax classification, and education finance. It would add a new surcharge section to the personal income tax code, create a new chapter imposing the wealth proceeds tax, revise grand list and education property tax provisions to require new parcel classifications and higher rates for nonhomestead residential property, and establish a dedicated special fund in the education statutes. It also includes transition provisions requiring the Department of Taxes to create new reporting forms and guidance before the property classification changes take effect.
Because there are no committee transcripts or recorded votes in the provided materials, there is no documented legislative debate or vote history to gauge support or opposition. Based on the bill’s structure and stated purpose, the measure appears designed to shift more of the tax burden to high-income taxpayers and owners of nonhomestead residential property while dedicating the new revenue to school construction and health care financing. The likely points of contention are the higher marginal tax burden on affluent taxpayers, the creation of a new tax on investment-related income, and the reclassification of nonhomestead residential property into a higher education tax category, which could affect second-home owners, seasonal property owners, and other nonprimary-residence property holders.
The bill would significantly alter Vermont’s tax code by adding new surtaxes on high-income individuals, creating a new tax on investment-related income for certain taxpayers, and establishing a separate property tax classification with a higher education tax rate for nonhomestead residential property. It would also create a dedicated School Construction Aid Special Fund and direct half of the education property tax revenue from nonhomestead residential property into that fund, while earmarking surcharge and wealth-proceeds revenue for Green Mountain Care financing. These changes would affect individual taxpayers, estates and trusts, property owners with nonprimary residences, school construction funding, and the Department of Taxes’ administration and reporting systems.
No committee testimony or vote record is provided, so there is no direct evidence of legislative sentiment in the materials. The bill’s stated purpose suggests a progressive revenue-raising approach focused on higher-income taxpayers and property owners, with the proceeds targeted to public programs such as school construction and health care. In the absence of recorded debate, the measure appears to be framed as a funding mechanism for state priorities rather than a narrow technical tax adjustment.
The main likely points of contention are the new taxes on higher earners and investment income, the retroactive effective date for the income tax surcharge, and the higher education property tax rate for nonhomestead residential property. Supporters would likely emphasize revenue generation for school construction and Green Mountain Care, while opponents may argue that the bill increases tax burdens on affluent residents, second-home owners, estates, and trusts, and could complicate property classification and tax administration. The bill’s use of federal tax concepts and its new classification system may also raise concerns about complexity, compliance, and implementation.