High Rankings Across Tax Measures

Vermont ranks among the highest states in the nation in tax collections on a per capita basis, according to the Legislature’s Joint Fiscal Office in its Fiscal Facts 2026 report .

The state places 5th nationally in total state and local taxes per capita, 3rd in state taxes per capita, and 4th in property taxes per capita. These rankings reflect how much is collected per resident, a metric used to compare states with very different population sizes.

Because Vermont is one of the smallest states in the country, total dollar comparisons are less meaningful. Per capita measures instead show how the tax burden distributes across residents—and by that measure, Vermont consistently ranks near the top.

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Spending Levels Also Among the Highest

High tax collections in Vermont correspond with similarly high levels of government spending.

The report ranks Vermont 7th in direct government expenditures per capita, placing it among the highest-spending states relative to population.

State spending is concentrated in several major areas. Human services, including Medicaid and corrections, account for the largest share at just over 40 percent of expenditures. K–12 education follows at roughly 32 percent, with transportation and public safety making up smaller but still significant portions of the budget.

This alignment—high revenue and high spending—places Vermont in a distinct category compared to many states with lower overall fiscal throughput.

Education Funding Drives the Numbers

Education is a major factor behind Vermont’s fiscal profile.

The state ranks 4th nationally in K–12 education revenue per student, at $27,834 per pupil. That figure is significantly above the national average and reflects both policy choices and structural factors within the education system.

Funding levels are influenced by declining student populations in some areas, fixed operating costs, and the design of Vermont’s statewide education funding formula. Fewer students spread across existing infrastructure can drive up per-pupil costs, even when total spending growth is more moderate.

Education spending is also closely tied to the property tax system, which serves as the primary funding mechanism for schools.

Unique Revenue Structure

Vermont’s tax system differs from many other states in how revenue is collected and distributed.

A larger share of taxes is collected at the state level rather than by municipalities. This centralized approach affects how Vermont compares to states where local governments rely more heavily on property taxes and local levies.

Because of this structure, Vermont’s state-level tax rankings appear higher, while local tax collections are comparatively lower. The Joint Fiscal Office notes that both state and combined state-local figures are necessary to make accurate comparisons across states.

Property Tax as a Major Driver

One of the most distinctive features of Vermont’s system is its statewide property tax.

Unlike most states, where property taxes are primarily local, Vermont collects a statewide education property tax and redistributes it through a funding formula. That tax is projected to generate about $1.69 billion in fiscal year 2026, making it the single largest source of state revenue.

Revenue is pooled and then allocated based on education funding formulas rather than remaining in the town where it was raised. This system is designed to equalize funding across districts but also contributes to the state’s high per capita tax rankings.

Composition of State Revenue

Outside of property taxes, Vermont relies on a mix of other revenue sources.

The personal income tax is the largest contributor among non-property taxes, accounting for about one-third of that category. Sales and use taxes and the meals and rooms tax also make up significant portions of state revenue.

Federal funding is another major component, covering roughly one-third of total program costs. These funds support a range of services, particularly in health and human services programs.

Overall, more than 95 percent of Vermont’s state revenue comes from taxes, reflecting a system that relies heavily on tax-based funding rather than fees or other sources.

High Revenue, High Expenditure System

Taken together, the data presents a consistent fiscal picture.

Vermont ranks near the top nationally in tax collections per capita, government spending per capita, and education funding per student. Each of these metrics reinforces the others, forming a system characterized by high levels of both revenue and expenditure.

The structure is internally consistent: higher spending levels require higher revenue, and the state’s tax system is designed to meet those demands.

Continued Fiscal Pressures

Despite these high rankings, Vermont continues to face ongoing fiscal challenges.

The Education Fund, in particular, is projected to run a deficit in fiscal year 2026. This occurs even with relatively high tax collections, highlighting structural pressures within the system.

Factors contributing to these pressures include rising education costs, demographic shifts, and the complexity of maintaining funding formulas that balance equity and local control.

A Comparative Snapshot

The Fiscal Facts 2026 report provides a comparative snapshot rather than an evaluation of policy outcomes.

It outlines where Vermont stands relative to other states across key fiscal measures, offering context for policymakers and the public. The data shows a state operating at the higher end of the national spectrum in both taxation and spending, with education playing a central role in that position.

Whether and how that structure evolves will depend on future policy decisions, economic conditions, and demographic trends.

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Dave Soulia | FYIVT

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