This commentary is by Ali Jalili of Burlington, a retired Foreign Service officer who served with the State Department in a variety of assignments all over the world. He was primarily an economic officer, analyzing and writing about economic issues relevant to U.S. policymakers.
We’re well into another legislative season with new and worthy goals and ideas for public sector action on issues we all care about — child care, transit, housing, broadband, etc. This is repeated at the local level by city councils and selectboards.
I moved to Vermont because of its many attractions and despite its relatively high taxes. I love Burlington and Vermont and wouldn’t have moved here if I were averse to taxes. I also feel that we get value for our taxes.
But while I favor higher federal tax rates at the highest tax brackets, I do not favor them at the state and local level, especially for a small state like Vermont. Of course the state needs revenues to operate. Of course those with the most means should pay the most. But we also cannot simply pile on worthy program upon worthy program, hoping to pay for them by “increasing taxes on the wealthy” (or by increasing taxes in general).
According to almost any metric (feel free to Google), Vermont has one of the very highest tax burdens of any state (somewhere in the top five, depending on how it is measured). However, unlike other high-tax states such as California, New York, or even Minnesota, which all have massive economies, large populations and major cities, Vermont needs every high-earning household it can get or keep.
Many high-income households have a choice in where to live, and whether to stay where they live. Many of their employers have a choice in where to be or where to expand. Taxes certainly factor into those decisions. We can’t afford to make Vermont the high-tax leader in the country.
We need more nurses, teachers, doctors and engineers, as well as skilled trades workers, among others, and thankfully we have seen a bit of an influx of new Vermonters. That said, nobody is moving to Vermont to pay more taxes.
People do move to Vermont despite high taxes, and we need to be aware that increasing the tax burden further could hinder some of that much-needed inflow of skilled workers. A “high-earning” family in Burlington already pays state income tax of over 7% at the margin, and over 2% of the value of their home annually.
Think of a two-income household with an engineer and nurse in Burlington earning $150,000 a year (that’s around the median, according to a few different websites) and living in a $600,000 house. This family would be paying state income and property taxes of approximately $18,000 a year, or $1,500 a month.
Maybe that’s fine. Maybe that’s not a huge deterrent to moving to Vermont or to staying in Vermont. But those suggesting these families need to pay yet more, even to fund very worthy goals, should think about what the tipping point is.
I’m a big fan of Gov. Scott’s oft-repeated line that we don’t need more taxes; we need more taxpayers. If we get enough of them to move here, maybe we’ll even be able to lower the overall tax burden for everyone because of all the new taxpayers we’ll have.
