This report examines tax reform in Vermont. A unanimous state supreme court decision in 1997 ruled that the state's educational finance system was unconstitutional. In response to this ruling, the legislature passed a new statewide property-tax system with two tiers: a block grant of $5,010 per pupil and a guaranteed yield for spending above the block grant. The paper explores the recapture provision of the law, where the state fills in any financial shortage due to lack of local fiscal capacity or recaptures excess revenue and redistributes it through the education fund. It discusses the tax-burden cap of 2 percent of income and discusses how this cap applies to the block grant and statewide property tax. The report then turns to the controversy generated by the new spending plan and how citizens of the wealthier towns in the state have protested against the plan. Issues include litigation and the claim that the state did not have authority to tax locals. A statewide property tax as a possible solution to the controversy is being explored by some as a solution to many problems, such as those presented by communities that circumvent the recapture provision in the law. (RJM)