Lowering Vermonters’ tax burden

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(Host) Commentator John McClaughry says that although Vermonters bear a heavy tax burden, there are ways to reduce it.

(McClaughry) Tax day has come and gone, but for many Vermont taxpayers its unhappy memory lingers. Tax burden is the total amount of state and local taxes collected divided by total personal income. Last year the Vermont tax burden stood at 10.2%. That placed Vermont tenth highest among the states. The reason for the high ranking is easy to find. Vermont is fourth in the nation in public education spending and fifth in welfare spending, which includes Medicaid.

Liberals are fond of saying, quite rightly, that family poverty leads to lots of expensive social ills. Therefore, they reason, government should impose heavy tax burdens on people who can afford to pay them, and use the proceeds to fund programs to aid the poor. This is the view of government as a philanthropic foundation that achieves social justice by redistributing wealth from those who earned it to those who need it. If this policy tends to discourage greedy business people from amassing wealth at the expense of their exploited workers, or even drives the rich out of the state, the liberal mind views this as just another benefit of high tax rates.

The opposing philosophy starts with the same premise, but veers off to a quite different prescription. If poverty leads to social ills, lets keep the tax and regulatory burdens to a minimum. That will stimulate economic growth and wealth creation. The increased revenues from economic growth, multiplied by low tax rates, will generate enough revenues to support essential government functions, plus provide public assistance for the needy. Where this philosophy has been tried, it invariably works.

What can be done about Vermont’s high tax burden? The obvious answer is to stop spending tax dollars on wasteful and ineffective government programs, and reduce taxes. Given the liberal tenor of Vermont politics, that argument has yet to make a lot of headway, although outrage against the increasing demands of Act 60 is a hopeful indicator.

The second-best alternative is to generate lots of economic growth that can then be moderately taxed to support Vermont’s big government habit. This runs up against the well-organized opposition of those who are simply opposed to growth. Typically these are environmentalists and many of the rural gentry who cashed out elsewhere, fled to Vermont, bought or built country homes, and now want to keep Vermont rural and unspoiled by the depredations of commerce and ordinary working people.

What Vermont needs is a coalition committed to cutting back on big government, and generating taxable economic growth to reduce the tax burden of paying for what remains. For the sake both of suffering taxpayers and working people eager to make better lives for their families, let’s hope that Vermont’s turn comes soon.

This is John McClaughry thanks for listening.

John McClaughry is president of the Ethan Allen Institute, a Vermont policy research and education organization.

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