Editor’s note: This commentary is by Doug Hoffer, Vermont state auditor.
[A] recent commentary from one of the governor’s assistants stated that “Every Vermonter withdrawing from the labor force causes each of us to pay [a] little more to cover the cost of state government, schools, public safety, roads and bridges – every public investment.”
But this statement is not an accurate portrayal of the facts. And if we are going to address the economic issues facing Vermont and Vermonters, then we need to have a candid and informed discussion. This official’s statement implies that those who retire, which is most of those leaving the labor force, no longer pay taxes, or they pay less than before. The evidence does not support that assumption.
Using personal income tax data from 2009 (which was cited as the peak of the labor force) and 2016 (the latest data available from the Vermont Tax Department), we see that the situation is not what some would have you believe.
First, Vermont’s aging population is reflected in the 1-percent decline in the number of returns from those younger than 65, while returns from those 65 and older grew by 30 percent (from 49,933 to 65,019). Overall, the number of returns increased by 4 percent from 2009 to 2016.
Second, on average, Adjusted Gross Income for those 65 and older is now higher than for those younger than 65 ($60,347 vs. $59,458).
More importantly, the average amount of income tax paid per return is higher for seniors than for those younger than 65 ($2,160 vs. $2,044). The figures are even more dramatic when we look at the per-capita averages because senior households are smaller than their younger counterparts (1.5 people per household vs. 1.8).
Therefore, the changes in the labor force have not increased the personal income tax burden on younger families. Seniors are now paying more than their share as income tax revenues continue to grow.
The commentary also asserted that, “Budgeting decisions will become more difficult as costs rise, and our economy will continue to consolidate into the Burlington area.”
The author first suggested (falsely) that total costs will be spread among fewer taxpayers. The further claim that total costs will rise is curious and, here too, no supporting evidence was provided.
And while the concern about the urban-rural divide is legitimate and important, it is unclear how changes in the labor force contribute to the problem (which is not unique to Vermont). Furthermore, based on what we know, proposals for paying people to move to Vermont do not address this issue because they don’t restrict the incentives to those relocating to distressed rural communities.
As I said in a recent commentary, we should invest in Vermonters rather than paying people to come here.
This discussion is important and should be informed by facts. Let’s not allow misleading information to scare us into paying for highly questionable programs.