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Update February 2011
In this issue:
-- Federal Tax Cuts Could Help Balance Vermont's Budget
-- A Solid Start for Tax Reform
-- Digging Out from Recession, But Still in a Hole
-- Shumlin Budget: Good News and Bad News
-- Hogan Joins Public Assets Board
Federal Tax Cuts Could Help Balance Vermont's Budget
While the agreement between President Obama and Congress last December to extend the Bush tax cuts will increase the federal deficit, it could help Vermont solve its budget problems. An analysis done for us by the Institute on Taxation and Economic Policy (ITEP) revealed that the top 5 percent of Vermont taxpayers will save $190 million in federal income taxes this year as a result of the tax-cut extension. In a recent report, we pointed out that this windfall could help close the state's budget gap in fiscal 2012. Increased demand for public services and the loss of more than $200 million in federal stimulus money leaves Vermont with a projected shortfall of about $176 million.
A Solid Start for Tax Reform
ITEP also helped us analyze the Blue Ribbon Tax Structure Commission's recent recommendations for improving Vermont's tax system. The Commission proposes to eliminate nearly all deductions and exemptions to the state personal income tax, replacing them with a simple tax credit for most taxpayers. The ITEP analysis concluded that the plan would not change the share of income taxes paid by each income group. Making more income taxable would allow Vermont to lower its tax rates and collect the same revenue. However, the Commission would lower the rates further, generating about $25 million less in personal income taxes than Vermont is collecting now. We testified before the House Ways and Means Committee urging legislators to maintain the personal income tax's current progressivity and avoid reducing the amount of revenue generated by the state's fairest tax.
Digging Out from Recession,
But Still in a Hole
The Great Recession has taken its toll on Vermont workers, as we described in our annual report State of Working Vermont 2010. But the report also revealed that Vermont and its working families were struggling before the recession hit. In fact, from 2000 to 2007, Vermont was producing jobs at the slowest pace in 70 years. Regaining the ground lost in the last three years won't be enough. We need to re-examine our recent economic development programs and revisit some of the proven strategies of the past, including investment in public infrastructure and education.
Shumlin Budget: Good News and Bad News
Gov. Peter Shumlin released his fiscal 2012 budget on January 25. Our initial assessment: He is tackling some long-standing budget busters—health care and corrections. But he balances the plan by cutting human services for Vermont's most vulnerable, rather than asking the wealthiest to give a little of their federal tax cut windfall. A more detailed analysis will follow. In the meantime, you can find the governor's budget at the Vermont Transparency website, operated jointly by the Public Assets Institute and the Ethan Allen Institute. It's the only place where you can compare the governor's budget line by line with previous years' spending.
Hogan Joins Public Assets Board
Con Hogan, of Plainfield, has joined the Public Assets board, Chair Linda Markin announced last week. Markin is also CFO of Concept 2 in Morrisville. Hogan is well known in Vermont for his work as Secretary of Vermont's Agency of Human Services from 1991 through 1999. Prior to that he was Commissioner of the Vermont Department of Corrections. He was president and CEO of a successful midsize corporation during the 1980s.
Public Assets Institute is funded by grants and donations. Please consider making a tax-deductible contribution to support our work.
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Fact: Ten percent of Vermont households had 42 percent of the state's household income in 2005; the highest income concentration since 1929.
Data source: Economist Mark W. Frank
Public Assets Institute Public Assets Institute finished its fall 2010 fundraising appeal in December just short of its $20,000 goal. If you meant to send a contribution but didn't, please consider making a tax-deductible contribution now.
town2town
bringing fiscal data home
Turning to Food Stamps
The recession has forced more people to turn to food stamps to avoiding going hungry. In December 2010, over 90,000 Vermonters were participating in 3SquaresVT, the state's food stamp program. The town2town map, based on data from the Vermont Department for Children and Families and the U.S. Census Bureau, shows food stamp recipients by town—both the number and the percentage of the town's population.
See the map.
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