Education Property Taxes and Vermont’s Affordability Challenge
Vermont’s education property taxes are projected to rise by approximately 12 percent in 2026, driven by continued growth in school spending and the expiration of last year’s tax buydowns. This increase comes at a time when affordability pressures are already weighing heavily on households, employers, and communities across the state.
Last year’s buydown was adopted with a clear understanding that it would provide temporary relief while lawmakers and the administration addressed the underlying cost drivers in Vermont’s education funding system. That commitment now hangs in the balance. Student enrollment has declined by more than 30 percent over the past two decades, yet education spending continues to rise, pushing per-pupil costs sharply higher.
Gov. Phil Scott has proposed using nearly $75 million in surplus tax revenues for another buydown in the coming year. It’s not yet clear if lawmakers will approve that use of Vermont’s much-needed surplus funds. There is an urgent need for durable, structural reforms.
Without them, cost pressures will continue to shift onto property taxpayers, including Vermont’s employers.
For the business community, these trends are deeply concerning. Employers are being asked to absorb higher tax burdens in a system that is delivering lower outcomes for fewer students. Vermont’s reading and math performance has slipped from among the strongest in the region to the middle of the pack, with recent assessments showing significant declines in key grades. These outcomes raise serious questions about cost-effectiveness, accountability, and long-term workforce readiness.
The business climate data reinforces this concern. According to the 2025 Vermont Business Climate Survey, employers rate the state’s overall business climate just 2.86 out of 5. Respondents cite rising costs, regulatory uncertainty, workforce availability, housing affordability, and taxes as the top constraints on growth. Rising education property taxes directly exacerbate these challenges.
Higher commercial property taxes increase operating costs and rents, tightening margins for small businesses and complicating decisions around expansion and investment. Housing affordability, already identified as a major barrier to recruitment and retention, worsens as property taxes rise, making it harder for employers across all industries to attract and retain workers.
As discussions continue around a “student-first” approach, it is important to ground reform efforts in data and outcomes. Improving educational results, strengthening accountability, and ensuring long-term sustainability must go hand in hand. An education system that serves students well also supports the broader conditions that shape their futures, including a strong economy, housing affordability, access to health care, and a competitive cost of living.
Some proposals would shift more of the education tax burden toward higher income taxes without addressing spending pressures. Without structural reform, these approaches risk further eroding Vermont’s affordability and competitiveness, particularly for skilled and mobile workers.
Last year, the business community successfully opposed a proposed business-only property tax classification that would have shifted costs disproportionately onto employers. As the Legislature revisits education funding, the Vermont Chamber will be watching closely to ensure businesses are not once again singled out to stabilize a system in need of reform.
The Vermont Chamber of Commerce continues to advocate for sustainable, data-informed reforms that address education spending pressures, improve outcomes for students, and protect Vermont’s business climate. Advancing affordability, strengthening the workforce pipeline, and supporting long-term economic vitality must remain central to any education funding solution.
