This commentary is by John Greenberg of Marlboro.
These days, everyone in Vermont political circles appears to be talking about “affordability,” as though it were a simple, unambiguous concept. It’s not, because America’s people are not all situated equally. In fact, our society is highly unequal when it comes to income and wealth, but our political discussions often appear to ignore that obvious fact.
Nothing is unaffordable for Elon Musk: he’s the richest person in the world. But that doesn’t mean that the identical expenditure will be affordable to someone working for minimum wage.
Gov. Phil Scott has spent years ignoring this simple point, pitching austerity when none is required. Joining him are most Republicans and their allies like the Vermont Chamber of Commerce. These folks made significant gains in the November election, relying essentially on just this tactic.
Their pitch? Taxes are unaffordably high, so the only recourse is to cut spending. When taxes really are at unsustainably high levels, and especially when governments are spending in non-core and even wasteful areas, this probably makes good fiscal sense. State and local budgets must balance.
But that is not our situation now. Health care costs and insurance premiums are rising; so far nothing is making a significant dent in that trend. Health care costs are one of the key drivers of government spending thanks to employee contracts. At least for the post-pandemic years, general inflation rose around the world thanks to the supply constraints that the pandemic had imposed. Vermont has a serious drug and alcohol epidemic which contributes significantly to high rates of homelessness.
These are just a few of the multitude of factors driving government spending at all levels and none of them is going away any time soon. Each merits an analysis of its own, but for now, it suffices to say that failure to address these problems will only exacerbate them.
Consequently, austerity is not an acceptable solution. Some cuts may be, but we can’t cut our way out of our problems. Trying to will only make them worse.
The answer lies in finding ways to raise revenues without straining the resources of most Vermonters. Fortunately, a solution is readily available: raise taxes on those who can easily afford to pay them and reduce them on those who can’t. To a greater degree than most states, Vermont already does this through its progressive income tax system.
The majority of Vermonters have long accepted the principle of tax progressivity, and to an extent, it’s even been applied to the property tax system. Most Vermonters pay property taxes defined by their incomes as well as the value of their real estate. But when it comes to sales, excise and other taxes, income differentials are put aside. Bill Gates and a minimum wage worker pay the same tax on each dollar of spending, despite the vast difference in affordability.
Vermont’s tax system as a whole is NOT progressive, but it should be.
Those with the greatest incomes and wealth in Vermont – residents and visitors – should bear the highest tax burden, NOT because they’re being punished or singled out, but because they can readily afford to pay more (Thanks to sharply rising incomes over the last four decades or more, “the top 1% of Vermont tax filers had more than $1 million left after meeting their basic needs.”)
Every time anyone suggests such solutions, the cry arises: they’ll just leave the state. But every shred of evidence contradicts this. Most recently, the Campaign for Vermont analyzed census data and information from the IRS and concluded: “Among high income Vermonters (those earning over $200,000) there are slightly more people moving in than moving out, but the numbers are very small.” More generally: “People leaving the state historically have had higher incomes than the people moving to the state, although that has changed in the past few years, possibly due to the influence of COVID-induced migration. But the difference has been, and is, relatively small.
No one wealthy enough to belong to the class of people we’re talking about is unaware of the fact that Vermont is next to New Hampshire, which has no income tax or progressivity in its revenue system. Despite the old joke, few if any wealthy Vermonters are moving to New Hampshire to “avoid one more Vermont winter.” Florida is another story.
Our path is clear. Raise taxes on those who can most easily afford to pay them and reduce them on the middle and lower income groups for whom they are causing most pain, while retaining and even increasing the services governments must provide to provide a brighter future: improve Vermont’s natural environment — its greatest resource — and provide the best education possible to insure its most important future resource: its children. Provide at least minimal food and shelter to those in need, and ensure the public safety.
Read the story on VTDigger here: John Greenberg: On affordability and Vermont revenues.