Voices

Taxation in Vermont: The numbers don't lie

The centerpiece of Republican gubernatorial candidate Brian Dubie's economic plan is to cut income tax rates by about one third.

Can state government survive the loss of about $200 million each year (according to an unofficial analysis by the Legislative Joint Fiscal Office) in lost revenue and still deliver essential services? Dubie won't say.

What the lieutenant governor will say to anyone who will listen is that Vermont's income tax rate is higher than Maine, Massachusetts, and Rhode Island.

Is that statement true? Doug Hoffer, the Democratic candidate for auditor and one of the leading public-policy analysts in the state, says it is not.

“It is disingenuous to talk about Vermont's 'income tax' for the simple reason that Vermont does not have one income tax,” Hoffer wrote in an e-mail to the Vermont media. “It has a progressive tax system so residents pay at very different rates depending on their income. I am certain Mr. Dubie knows this, so it makes me wonder why he would use such language.”

Hoffer will concede that Dubie is talking about the top 1 percent of tax filers in Vermont. But the other 99 percent of Vermonters, those who earn less than $373,000 a year, pay significantly lower taxes than their neighbors in Maine and Massachusetts. That's due to the progressive nature of Vermont tax brackets.

Dubie is also saying that Vermonters have the highest property taxes in the country. Once again, he is stretching the truth.

Hoffer stated that Dubie “has misused Census data on state level property tax and conveniently ignored the fact that Vermont is the only state where education costs have been shifted to a statewide property tax, making the comparison Mr. Dubie is drawing completely without validity.”

Also, Hoffer stated Dubie's figures “do not account for the amount of property taxes paid by non-residents, which is an important consideration in a state ranked number two in the percentage of vacation homes.”

“In 2007,” he continued, “the Joint Fiscal Office estimated that Vermont exported approximately $244 million in property taxes paid for second homes and commercial properties by non-residents. If this is subtracted from the Census figure, Vermont drops down to 16th - quite a different story than 'the highest in the country.'”

Dubie argues that cutting the taxes of the wealthiest Vermonters would stimulate economic growth, for they are the business owners and investors. But as we've seen on the national level over the past three decades, cutting taxes on the wealthy merely makes the wealthy more so.

There are only around 1,400 Vermonters in Vermont who earn more than $500,000 each year. So how many of these 1,400 people are legitimate job creators?

Data from the Public Assets Institute, a Montpelier think tank, shows that federal income tax cuts enacted by the Bush administration between 2003 and 2007 saved about $550 million for Vermonters earning more than $200,000.

Did this create jobs? Between 2001 and 2007, according to the U.S. Department of Labor, the private-sector job growth in Vermont was 1 percent. By comparison, between 1991 and 2000, the rate of private-sector job growth for that period was about 22 percent.

While you can't totally link the Bush tax cuts to the 1-percent job growth rate, these figures do not support Dubie's belief that tax cuts create jobs.

We're going to hear a lot more about taxes in the coming weeks. We hope that Lt. Gov. Dubie -  and his Democratic opponent, Senate President Pro Tem Peter Shumlin, who we think has taken a bit too much credit for state tax policies in the 1990s - stick to the facts when talking about the subject.

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