Public Assets Institute > Press > Op-Eds > Dissing Vermont is Bad for Business

Dissing Vermont is Bad for Business

May 30, 2010, Times Argus

For years, the governor has been repeating a mantra: Vermont is bad for business. Its taxes are too high, its environmental regulations too onerous, its schools too expensive, he says.

This year he convinced lawmakers to lower taxes. His evidence came from a pretty solid source: the U.S. Census Bureau. It’s the same source he’s been citing for years; this time it was reported in Vermont Business Magazine in May.

There’s one glitch, however: The federal government stopped using that particular Census report several years ago, since the Bureau’s economists concluded its method of analysis led to findings that could be “misleading and misinterpreted.”

The Census Bureau produces two reports about revenues collected by the states. One focuses solely on state-level revenue. The other includes state revenues and revenue collected by local governments, like counties and municipalities.

The state revenue report, which is the one Vermont Business Magazine cited, distorts Vermont’s ranking because most of our property taxes are now state revenues. In other states, property taxes are primarily local taxes. This puts Vermont at the top of the state-revenue-only rankings.

To be sure, when state and local taxes are counted, Vermont still would be ranked higher than many states on a per capita basis. Which is exactly the kind of computation the Census Bureau stopped using in 2005. “Analysis based on rankings or per capita statistics can be misleading and misinterpreted,” the Bureau’s website says, “because of subtle yet important differences in state government organization and economic structure.”

A big problem, the Census explains, is that the state or state and local revenue in its reports is all of the revenue collected within a state’s borders—not just the taxes paid by residents. Alaska and Florida are two cases in point. Alaska collects a severance tax from oil companies, but has no general sales tax or personal income tax. So it would rank high in per capita taxes even though much of the revenue doesn’t come from residents. Florida relies heavily on sales taxes, many of which come from non-Florida residents.

A better way to compare state taxes is to look at the taxes residents actually pay. The Vermont Joint Fiscal Office did this in a study a couple of years ago. The study created a couple dozen hypothetical tax filers and then computed their taxes in each of 12 states, including Vermont, Florida, and other New England states. The Joint Fiscal Office study did not include property taxes.

The District of Columbia regularly analyzes the taxes paid in the largest city in each state and compares them to the district’s taxes. Like the Vermont Joint Fiscal Office study, the DC analysis creates hypothetical filers and calculates their taxes. The DC study does include property taxes. In the latest analysis released last fall, the DC study looked at families with incomes of $25,000, $50,000, $75,000, $100,000, and $150,000. In that study, Burlington was in the middle of the pack, except for the lowest income bracket, where it ranked 44th.

The Vermont Business Magazine article was correct when it said: “Methods of calculating states’ comparative tax rates differ on the basis of who’s doing the calculating.”

Methods of deciding what’s good for business also differ depending on who’s doing the calculating. So it’s interesting to look at another survey, in this month’s Kiplinger’s Personal Finance Magazine, which ranks the “10 Best Cities for the Next Decade.” Working with the Martin Prosperity Institute, the magazine weighed the cities’ affordability, public transit, and the number of people working in the “creative class”—like artists, educators, scientists—to find “great places to start a business or find a job.”

Number 8: Burlington, where, Kiplinger’s said, “environmentalism”—specifically the local-food movement—“drives much of the city’s economic growth.”

The JFO and DC studies show that Vermont’s taxes compare favorably to many other states. Vermont’s well-educated workforce, clean environment, excellent public schools, and overall high quality of life are widely cited as reasons to set up shop here.

So you have to wonder why the governor is so intent on seizing any information—even misleading information—that makes Vermont look bad. And why he seems to think that slashing revenues and weakening our schools, public services, and environmental protections would be good for Vermont’s economy.

Jack Hoffman is a policy analyst for Public Assets Institute (, a non-partisan, non-profit organization based in Montpelier.