Ahead of next month’s election, Vermont public agencies are running a media campaign called Citizens’ Agenda. Essentially, we’ve been asking politicians which issues they’d like to see prioritized. And we found that a lot of people wanted to talk about taxes and how to lower them.
“Why don’t they use the tax revenue from cannabis for education instead of raising people’s property taxes?” asked Liz Kehoe-Palumbo.
Additionally, there are so-called vice taxes on programs that add revenue to Vermont’s coffers, such as online sports betting and the lottery.
Many Vermonters are thinking about their property taxes right now. On Town Meeting Day, nearly a third of the school budget failed. This is the highest percentage in recent years, with some districts requiring five votes to reach a final “yes” vote.
To answer Liz’s questions, Vermont Public senior political reporter Bob Kinzel, who follows both state government and the cannabis industry, spoke with host Jen Jarecki. We highly recommend listening to the audio. We also provide a transcript that has been edited for length and clarity.
Jenn Jarecki: I know there are a lot of numbers in this conversation, so let’s start with the really big numbers. How much money does Vermont spend on education annually?
Bob Kinzel: Jen, this number has been increasing over the years. For example, in 2018 it was $1.6 billion. Currently, that amount is approximately $2.3 billion, with the big spending portion being approximately $2 billion to support local school budgets and another $260 million for special education costs.
Jen Jarecki: Okay, that’s a lot of money. So Bob, how does the state collect more than $2 billion each year for education funds?
Bob Kinzel: There’s actually a lot of different ways, but there are three main sources of funding. One is housing property tax. This equates to approximately $600 million. 2. Non-residential property tax. This is a tax on businesses and vacation homes. This equates to approximately $900 million. And third, all state sales taxes. This is about $600 million. Therefore, it is very important to keep this $600 million number in mind when discussing alternative funding sources to replace housing property taxes.
Jen Jarecki: Okay, good to know. Now let’s turn our attention to cannabis. So how do states tax and how much money does the market bring in?
april mccallum
/
vermont public
Cannabis varieties for sale at Sweet Spot dispensary in Essex Junction on October 18, 2024.
Bob Kinzel: Jen, there are two taxes. 6% sales tax and 14% excise tax. Basically, it is a tax levied on goods, services, or activities. And while those two taxes will combine to account for about $25 million this year, it’s important to remember that this money is already being used to fund other programs.
For example, $11 million from sales taxes is used to fund after-school programs. James Pepper, Chairman of the Cannabis Control Board, says this is a very important investment.
James Pepper: In my opinion, there is a direct correlation to the times when children are most likely to experiment with these illegal drugs. There is no supervision between 3pm and 5pm after school. This is your chance to try cannabis.
BOB KINSEL: Currently, about $14 million a year is collected in state excise taxes, and about $4 million of that revenue goes toward drug prevention programs. The remaining $10 million will go to the general fund for other state programs. So there’s really no money available to reduce property taxes from cannabis taxes unless you take money away from these other programs. And it would be very controversial.
Jen Jarecki: That old man robbed Peter to pay Paul, right? OK, Bob, so what should the state do if it decides to raise a significant amount of new money from cannabis taxes to reduce its property tax burden?
Bob Kinsel: Jen, I asked Chairman Pepper that question, and there’s not much that can be done. He said the state could double the tax rate from 20% to 40%, but that would push prices up and send many people back to the traditional market. And that leads to decreased sales and decreased income.
James Pepper: Of course people will be willing to pay a premium for regulated products, but 20% is probably the upper limit of what the average consumer can tolerate before turning to these alternative markets.
Jen Jarecki: Well, still on the topic of cannabis taxes, how are some of the other 23 states that have legalized retail sales using that revenue?
Bob Kinzel: Jen, that’s really interesting. Each state seems to have a different plan. Most states use a portion of their funds for drug prevention and substance abuse programs, general funds, law enforcement programs, social equity programs, and education programs. It could be K-12 or higher education. Therefore, this income can be used in a variety of ways.
Hilurg/Getty Images/iStockphoto
/
iStockPhoto
Middle-aged man using mobile app for live betting and online gambling and watching sports matches
Jenn Jareki: Well, let’s switch gears a little bit. Bob. Could tax revenue from online sports betting put a strain on education funding?
Bob Kinzel: Well, Jen, the initial estimate was between $7 million and $10 million per year, which could certainly increase over the next few years. But this is money that is currently going directly into the general fund, so it’s already accounted for. And you’ll be faced with the same problem of needing to find other sources of income to pay for your existing programs.
Jen Jarecki: What about the money that the state receives from all the lottery programs – scratch-off tickets, Megabucks, things like that.
Bob Kinzel: All lottery programs raise about $35 million a year. And, as Liquor and Lottery Commissioner Wendy Knight points out, all of those proceeds are already going to the education fund.
Wendy Knight: Lottery funds support only a small percentage of education funding. Vermont Lottery – 100% of profits go to education funds, less than 2%. More lottery revenue will be needed to solve the property tax problem.
Jen Jarecki: Well, in that case, Bob, is there a way to dramatically increase state lottery revenue?
Laura Nakasaka
/
vermont public
This story was created with input from our viewers.
Bob Kinsel: Jen, probably. But I don’t think they’ll get much support from Congress or the Scott administration. As you know, in the early 1990s there was a well-funded proposal to develop a casino on the site of the old race track in Pownall, just south of Bennington. But it was defeated in the state Legislature, and Commissioner Knight said no one is discussing this option at this time.
Jen Jarecki: Okay, Bob, we need $600 million in lieu of housing property taxes that go to the education fund. And at best, the state only makes about $50 million total from cannabis and sports betting, and most of that money has already been paid for. And of course, you mentioned earlier that the lottery money is already being donated to the education fund. Admittedly, I’m not very good at mental arithmetic, but it’s clear that this won’t help.
Bob Kinzel: Bingo, Jen — that’s the answer to Liz’s question. Some people consider income tax because they need to use larger financial resources. This is the state’s largest source of revenue so far, and nothing comes close. However, this change would be highly controversial. This is because some people feel that it is a more unstable tax than property tax. And changing the source of income doesn’t really touch on the issue of increased expenses.
This article is part of Vermont Public’s Citizens Agenda approach to election coverage. We are asking a simple question. What would you like the candidates vying for your vote to discuss? Front Porch Forum is the lead outreach partner for this project.
Have any questions, comments, or tips? Send us a message.
