It used to be when someone from Windham County would say, “I’m going to Keene,” everyone knew exactly what that meant: an afternoon of discount retailing. Keene, New Hampshire, had its strip malls, car dealers and fast food restaurants. It was the last place I saw a Mister Donut. But otherwise, people on the Vermont side of the Connecticut River considered it an economic and cultural backwater.
Just recently, Vermont’s largest locally based company announced that it was going to Keene. C&S Wholesale Grocers, with more than $9 billion in sales, will move its headquarters out of Brattleboro by the end of 2003, and with it upwards of 400 employees. After an agonizing site selection process, C&S chose Keene for a few hard-to-argue-with reasons: the corporate tax would be lower, there is no personal income tax over there, and there is more available land.
While C&S will keep its warehouse in Brattleboro, where it will continue to employ several hundred people, this is still a huge decision. And it wasn’t made by some distant corporate giant. CEO Rick Cohen lives in Keene and is a third-generation owner of a company that moved from Massachusetts to Brattleboro more than 20 years ago. C&S has used economies of scale, a non-unionized workforce and its own innovations to grow into the third largest food wholesaler in the country.
This is not, however, the end of Brattleboro. It still has many robust manufacturers, as well as a budding high-tech industry, and maybe the hippest downtown in the state. But no town in Vermont can simply shrug off the loss of 400 well-paid workers.
So, what can Vermont do to stop other businesses from leaving the state? For one thing, the state should seriously consider a reciprocal income tax agreement with New Hampshire. People living in New Hampshire but working in Vermont would not pay Vermont income tax. Development officials can make a good case that Vermont is a better place to do business than New Hampshire. Vermont has the interstate highway, it has the railroad, and for a lot of businesses, Vermont is cheaper.
What Vermont can’t get around is that site selection is made by a CEO who himself has to pay the state income tax. A reciprocal tax plan would cost Vermont millions of dollars in income tax revenues. But no one that I know of has ever done a detailed study on what is lost because of the income tax. There’s more than income tax revenues at stake here. There are corporate taxes, property taxes, sales taxes, and many business and community development issues.
Just saying, “Well, we did what we could to keep them,” really isn’t good enough.
Keene has grown a lot ¿ economically and culturally ¿ since I lived in Windham County in the 1980s. Back then, we used to make fun of Keene. I don’t hear anyone laughing now.
Timothy McQuiston is editor of Vermont Business Magazine.