Tax penalty reduction on meeting agenda

By Tom Gresham
Observer staff

Williston voters who attend Town Meeting on Feb. 28 will consider a proposal to sharply reduce the late penalty on tax payments.

Currently, taxpayers who do not make a payment by the final due date of the year are charged a penalty of 8 percent of the taxes still owed for the year. Under the new proposal, the penalty would be reduced to 1 percent.

Town Manager Rick McGuire said the town currently receives about $45,000 in revenues from late penalties. The proposal would cut the amount to approximately $5,000. If approved, the new penalty would be implemented in the 2006-07 fiscal year.

McGuire, who also serves as the town’s collector of delinquent taxes, proposed the change for the Town Meeting Day agenda, saying the 8 percent late fee was extreme and especially burdensome for financially strapped residents.

McGuire said state law had required the 8 percent penalty for years before the Vermont Legislature changed the law last year to give municipalities more control over the late fee they charge. According to McGuire, the 8 percent fee had originally been designed to serve as a commission to pay the municipalities’ collectors of delinquent taxes.

However, Williston, like many other towns, no longer pay a commission to the collector, who is often a town employee. In fact, McGuire said he is prohibited from receiving a commission in his post as town manager.

McGuire said taxpayers’ reactions when learning of the 8 percent late fee over the years have often ranged from shock to anger. He said the proposed reduction in the late payment is particularly designed to aid people who do not have the money to make their payment by the deadline — instead of those who merely forgot or procrastinated too long.

“There is a group who knows about the tax deadlines and remembers them but they are not in a financial position to make them,” McGuire said. “Then, you add the 8 percent on top of that and you really start to dig a deeper and deeper hole for them.”

The owner of a $200,000 residence would have had a total property tax bill of $3,180 in the current fiscal year. The final payment was due earlier this month. If the owner of a $200,000 home had made the prescribed payments on the first two installments of the year, but then missed the third, he or she would have been charged an $84.80 penalty on top of the $1,060 payment.

For those people who missed all or part of their property tax payments on the first two installments, the penalty can be particularly steep, because the 8 percent is applied to the entire amount still owed for the year.

In addition, the town charges 1 percent interest for the first three months it has not received the full payment and 1.5 percent interest after that.

The proposed due dates for the tax payments for the 2005-06 fiscal year are Aug. 10, Nov. 10 and Feb. 10. Approving the due dates will also be on the Town Meeting agenda.