Top Vermont earners are making more, but income for lower earners is stagnant, according to the Public Assets Institute’s 2019 report.
Wages have increased 8.3% since 2010 for those earning in the 90th percentile in Vermont. For those in the 50th and 10th percentiles, wages have increased 5.2% and 4.7% since 2010 respectively, says the nonprofit’s State of Working Vermont 2019, released Dec. 26.
The report shows that the newly enacted tax cuts pushed by the Trump administration are widening the divide. The report analyzes data from 2018, the first year the tax law changes went into effect. At the time of passage, many people predicted that the cuts would benefit only the most wealthy. The report says that the richest 1% of earners in Vermont received an average $30,000 tax reduction, while the poorest 20% saw an average $150 reduction.
Vermont taxes are relatively progressive, the report said, noting that the state was one of five singled out by the Institute on Taxation and Economic Policy in 2018 for systems that “do not worsen income inequality.”
But federal tax policy — including policy set well before the Trump administration — has been more regressive, disproportionately benefiting the wealthiest Vermonters.
“In both dollars and percentages of income, the tax cuts were larger for the top 20 percent than for the bottom 80 percent,” the report said. “The total windfall for those in the top 20 percent of tax filers came to more than $350 million in 2018, and the tax breaks will continue until they expire or change.”
Taxes are not the only culprit; the report said that while Vermont has had the lowest unemployment rate — now around 2% — in the nation for several years, wages have not increased accordingly. Vermont ranked 38th in the nation for annual wages in 2017. From 2010 to 2018, the report said, pay for lower-paid workers did not keep pace with Vermont’s slowly growing economy, which increased 5.8 percent during the same period.
“Wages for those at the top, however, grew faster than the overall economy,” the report said.
State lawmakers have made raising the minimum wage — now set at $10.96 as of Jan. 1 — a top priority in the upcoming session. Raising the minimum wage is the most meaningful step lawmakers can take to address income inequality, said Sen. Michael Sirotkin, D-Chittenden, and the chairman of the Senate Economic Development, Housing and General Affairs Committee
“We also need to deal with issues such as housing costs and child care costs, which I think we’ve started to make a dent in,” Sirotkin said.
Sue Minter, executive director of Capstone Community Action, an anti-poverty agency in Barre, said that when she gets to work in the morning, there are people waiting for the doors to open so they can find help with things like food, housing and heating.
Minter said many policymakers and the public appear to think some of the causes of poverty are intractable.
“There isn’t a clear awareness of the problem,” said Minter. “These problems are solvable. It comes with greater subsidies to the key programs that help people,” such as child care and food assistance, instruction in financial literacy and eliminating the benefits cliff that deters people from pursuing better-paying positions.
Paul Cillo, president of the Public Assets Institute, also said policymakers can address some of the inequity by investing more in social programs that have been shown to alleviate poverty. He called for the Legislature and Gov. Phil Scott to approve the minimum wage increase and paid leave this year. Increasing investment in affordable childcare and secondary education programs would also help, he said.
“If the Scott administration really wants to help working people,” Cillo said, “the one thing they could do is to take action to bring up wages.”
The Scott administration has shown little enthusiasm for a minimum wage increase. Lindsay Kurrle, secretary of the Agency of Commerce and Community Development, said the Scott administration is wary of placing the burden of an “arbitrary” minimum wage increase on small businesses. Kurrle said she favors affordable and accessible training programs to help workers move beyond minimum wage jobs.
“We have such a low unemployment rate, employers are getting creative to help bring people in and pay them wages that help keep them here,” Kurrle said. “Organically we can let the supply and demand do its job.”
However, not all data presented in the report may represent widening income inequality in Vermont. Art Woolf, emeritus associate professor of economics at the University of Vermont, pointed to the figure in the report that more Vermonters are using food stamps in the state than before the Great Recession. Woolf said this might be due to rising availability and better outreach, not an increased need.
Referring to the concern raised in the report that tax revenue spending on public services has remained stagnant in Vermont, Woolf said it’s important to note than even a 1% fluctuation in tax revenue can represent hundreds of millions of dollars, so it’s not often substantial changes are seen.
Public Assets examines tax, budget and economic policy issues from the perspective of working Vermonters. It is supported by grants and individual donations; its largest funder is the Annie E. Casey Foundation.
