Economy

Economy

Progressive plan promotes tax equity, jobs, savings and carbon reduction

On Friday I was joined by a coalition of legislators promoting a plan to fund the “all fuels efficiency.” This is the project advanced by Shumlin and others a few years ago until Douglas vetoed the bill on account of not caring for the proposed funding source.

Now that Shumlin has to approve the funding mechanism his enthusiasm has waned.

As a reminder, an all-fuels efficiency effort was primarily meant to help Vermonters better insulate their homes. We have old, leaky houses in Vermont and a lot of our heat escapes through the cracks. Better insulation saves the average home $600 - $1,900 a year. Every year. But most of us don’t have the disposable income needed to make the investment. If the state helps with the upfront cost we can create jobs (nearly 300 good-quality jobs), save people money on heating fuels, and reduce our carbon output.

To fund this valuable idea we turn to the income tax. We get a lot of heat in Montpelier for having the “highest tax rate in the country.” This ignores the effective tax rate. And ignores the progressive tax structure of our income tax brackets. Furthermore, last-year’s blue ribbon tax commission study found that overall tax burden on Vermonters isn’t progressive at all; it’s flat to regressive. So it needs addressing.

The proposal raises $17 million and generates an estimated $28 million in economic activity. It raises the money by closing a loophole wealthy taxpayers enjoy. While McClaughery and his ilk take shots at Vermont for our high marginal rate they conveniently ignore that a taxpayer earning $500,000 a year doesn’t pay the top rate of 8.95% on their whole income. The system allows a tax filer to stop at each of the five tiers on the way up the income ladder. So the first $56,000 is taxed at 3.55%, the next $80,000 at 6.8%, income between $137,000 and $209,000 is at 7.8% and so on. Finally any income over $373,650 is taxed at the full 8.95%. Our proposal says someone earning $500,000 a year starts at the fourth bracket (8.8%) and finishes in the top bracket (8.95%). The average change for those in the top bracket is $4,750 and those in the fourth bracket pay about $2,800 more. In total this impacts fewer than 4,000 tax filers so can hardly be described as a “broad-based” tax which Shumlin so opposes increasing.

By bringing effective tax rates closer in line with marginal rates we actually live up to the rhetoric of having the highest tax rates but get to use the revenue that goes along with it. Jobs, savings, carbon reduction and tax equity…what’s not to like?

VT Edition: Banking On It: How A State Bank Works

February 8, 2012; Vermont Edition; Jane Lindholm

Vermont lawmakers are contemplating the idea of a state bank in a bill now in House and Senate committees that would establish a study committee to examine the idea. Only one state, North Dakota, has a state-owned and operated bank that is backed by the state's general fund. But the idea of a state bank is catching on in several states that are seriously considering the idea.

We talk with Eric Hardmeyer, president of the Bank of North Dakota, about how BND operates and with Marc Armstrong of the Public Banking Institute about why his organization is helping other states start similar institutions. Then, we talk with Vermont state Senator Anthony Pollina, who supports studying a state bank for Vermont, and Chris Delia of the Vermont Bankers Association, which opposes the idea.

[Listen Here]

Salmon: Public policy by sound bite

While speaking on the radio recently (WDEV), Tom Salmon offered his views on tax policy. He said he would like Vermont to be a "no income tax state." Apparently he views this as a necessary remedy because "we're a very sketchy state for businesses [and] New Hampshire continues to eat our lunch."

The idea that Vermont's economy is anti-business and suffers in comparison to other states is a common refrain but is not supported by the evidence. For example, for three major economic measures -- rate of job creation, unemployment, and per capita GDP, Vermont has exceeded the national average over the last ten years and is virtually identical to (or better than) New Hampshire.

Like the rest of the country, Vermont still has problems. But to suggest that Vermont is an economic basket case is just plain wrong. And it is hyperbole (if not demagoguery) to suggest that New Hampshire is “eating our lunch.”

Finally, not only is Mr. Salmon's desire for Vermont to be a no-income tax state the wrong remedy, it creates a $600 million dollar hole in the state budget. Mr. Salmon hasn’t said how he would fill that hole. Typically, having no income tax means the state must rely more heavily on regressive property taxes and fees (like New Hampshire). The result is a skewed distribution of the tax burden that benefits the wealthy. 

Mr. Salmon is certainly entitled to his opinion, but as the State Auditor, one would hope that he forms his opinions after careful analysis of the facts. To my knowledge, the Auditor’s Office has not produced any reports that provide the evidence necessary to support Mr. Salmon’s conclusions. In this case, it appears that Mr. Salmon is satisfied with unexamined assumptions and sound bites. These are not qualities we look for in a State Auditor.

Should the Legislature Commit to Reducing Income and Wealth Inequality?

What's Left

Independent financial analyst Doug Hoffer had some startling information about the distribution of taxes in Vermont. Listen to him explain how the wealthiest Vermonters pay a lower percentage of their income in state and local taxes than the middle class--and how many Vermonters who make over $1 million a year paid no income taxes in a recent year.

State Senator Anthony Pollina explained a resolution he co-sponsored that commits the legislature "to reducing income and wealth inequality by rejecting policies that increase disparity and to supporting policies that close the wealth and income gap and increase economic opportunities for all Vermonters." It's now in the Committee on Economic Development, Housing and General Affairs, chaired by Senator Vince Illuzzi.

Carl Etnier and Meg Brook hosted.

To listen to the show, click here.

Lawmakers Want Vermont To Create State Bank

January 20, 2012; VPR, Bob Kinzel

(Host) A group of lawmakers wants Vermont to become the second state in the country to create a state bank.

They believe a state bank would strengthen the Vermont economy by making more capital available to small businesses.

VPR's Bob Kinzel reports:

(Kinzel) The creation of a state bank has been a priority for Washington County senator Anthony Pollina for many years. Pollina has studied the operations of the only state bank in the country, it's located in North Dakota, and he thinks Vermont would benefit from having a similar operation.

Pollina wants to take most of the money that the state temporarily invests in large out of state investment banks and redirect these funds to a Vermont state bank that would focus on making low interest loans to small businesses and perhaps even underwrite student loans.

Podcast GPI

Legislative update podcast on the Genuine Progress Indicator (GPI), the VT State Hospital, Health Care and Redistricting.

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