Vermont has imposed some kind of broad-based wealth tax since before it became a state. Our beloved constitution of 1777 put the burden of supporting public services squarely on the shoulders of every Vermonter:
every member of society hath a right to be protected in the enjoyment of life, liberty and property, and therefore, is bound to contribute his proportion towards the expense of the protection
Vermont Constitution
Sounds like, from each according to his abilities, and to each according to his needs. But that came later.
18th Century
The first statewide wealth tax came in 1781 when the legislature for the first time collected a tax of 10 shillings on each hundred acres of land — land at that time being the chief form of wealth. Its purpose was to raise the money necessary to pay Vermont’s debts from the Revolutionary War. The tax was uniform, and went directly into the coffers of the State. The result was that we were one of the first states to pay off our debt.
This statewide tax set the standard for taxation for the next 60 years. Land and personal property was assessed by state statute at set values: so much per acre, so much per animal, those two accounting for most of the wealth available at the time. This was based on the assumption that property created wealth in proportion to its size, and the government could legitimately claim a portion of that wealth. See the Constitution above.
19th Century
In 1841, the state wealth tax was expanded to include all categories of wealth, adding personal property and financial assets. The wealth tax was strengthened again after the Civil War, when the state required banks and other financial institutions to report each Vermonter’s assets to the state. This wealth tax was the state’s principal source of revenue from 1781 until 1882. It remained an important part of total state revenues until 1931, when the first income tax was adopted.
At one point, in 1825, some of the revenue from this statewide wealth tax was shunted off into a statewide Education Fund, which was distributed to the towns for the support of public schools. This was at the time when the first State Board of Education was established by the legislature.
In 1890 the State School Superintendent issued a damning report from on the inequitable education opportunities and tax burdens around Vermont:
The inequalities in taxation for school purposes are positively startling…there are towns in the state in which the average rate of taxation for school purposes amounts to only seventeen cents on the dollar of the grand list, there are others where it amounts to seventy-five cents, and one in which such average rate is one hundred and thirty cents…
I notice that in a town like Bennington, one district escapes with a tax of six cents on the dollar of the grand list, while another is subject to the burden of a tax ten times as great in its rate. … in one district the rate of school taxation is only seven percent, while in another it is two hundred and fifteen percent. …
A great wrong has been done to the poorer class of towns and the smaller districts in the failure to provide an adequate system for equalizing taxation for the maintenance of the common schools, … the wrong can never be remedied until we adopt the policy already adopted by at least nine-tenths of our sister states in levying a state tax for this specific purpose…
The education of the masses is absolutely essential to the safety of the state and the United States; that it is, indeed, a public necessity; the spirit of the Constitution, as well as its letter, requires that, inasmuch as society is protected in its enjoyment of life, liberty and property in a thousand fold greater degree by education than through its jails and prisons, every member is bound to contribute his proportion toward the expense of that protection…and yet the state has subjected a portion of its citizens, and those least able to bear it, to unjust hardship.
In response, in 1890 the state imposed tax of five cents on all property for the support of public schools. This money was then re-allocated to the towns on the basis of the number of students educated in the previous year. This tax was increased to eight cents two years later.
20th Century
Not everyone was happy with this rate of taxation. A candidate for governor complained in 1906 that total state expenditures had gone up 112% in the last 30 years while the population had grown less than 4%. He described this as “gross negligence and misconduct in the management of the monies of the state.” Have we not heard something similar quite recently?
Nonetheless, the statewide property tax for the equalization of education
remained until the adoption of a state income tax in 1931. In the following years, revenue from a tax on real property was collected by the towns, who were expected to use it to maintain schools and roads. But the tax on other forms of wealth withered away, such that Vermont no longer collects a contribution from wealth held in stocks, bonds, bank accounts, trust funds, or business equity, even though those are the fastest-growing and most valuable assets among Vermonters today.
In the 1970’s a repeat of the 1890 damnation led the Governor and Legislature to attempt to equalize both school quality and tax burden by setting up yet another statewide Education Fund fed by income and sales taxes. Money from the fund was doled out to districts with less taxable real property than others, in an attempt equalize things. These payments were called State Aid to Education. But the vast and growing differences in taxable real property per child among Vermont school districts could not be overcome by this weak attempt at equalization.
21st Century
Spurred on by a court decision that declared educational inequities to be unconstitutional, the 21st century brought the realization that a statewide approach was necessary. A portion of town property tax revenues were put into a statewide pool, which was then redistributed to the towns, again based on taxable property and spending per student. This reduced inequity somewhat, by leveling up the spending in poorer districts, to such an extent that that the statewide portion of the real property tax rose rapidly.
At the same time, Vermont experienced an influx of well-off new residents, many of them retirees, with substantial wealth from investments, retirement funds, business equity, and financial assets. In fact by 2025 the number of WOOFs exceeded the number of students in school, and the value of Vermonters’ non-taxed assets exceeded the value of their taxable houses and land.
Perhaps now is the time to look back in history for better ways to allow
every member of society … to contribute his proportion towards the expense .
Vermont Constitution
Sources:
Education and Property Taxes: A View From 1890, by Gregory Sanford, State Archivist, December 2006.
The Evolution of the Vermont State Tax System, by Paul Gillies, Vermont Historial Society, WINTER/ SPRING 1997.
The Governance of Education in Vermont – 1777 to 2006, by Richard H. Cate, Commissioner of Education – May 12, 2006
The history of school consolidation battles, by William Mathis, VTDigger, 2015,
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