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We should be trying to make it less expensive to live, work, and play in Vermont.

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April 26, 2023

We should be trying to make it less expensive to live, work, and play in Vermont.

By: Department of Economic Development Commissioner Joan Goldstein

It’s fair to say we are living in an unusual economic environment. Historically high interest rates and inflation are creating challenging conditions for businesses large and small, and impacting the wallets of individual Vermonters. You don't have to work in economic development to see how squeezed folks are feeling — just go grocery shopping.

These new challenges come after a lengthy pandemic wreaked havoc on health care, hospitality, education, arts and cultural institutions, and the small business community. This exacerbated our pre-existing labor shortage, housing shortage and added supply chain disruptions that persist across all sectors of the economy.

With this economic environment as the backdrop, the Legislature is currently considering:

  • $117 million payroll tax for mandatory paid leave;
  • $100 million tax increase for childcare;
  • $20 million in DMV fee increases; and
  • $30 million in property tax increases for school meals.

When people point out to me just how expensive it is to operate a business here, or to live here, I usually say “we do not compete on price.” But these latest initiatives have their costs: one proposal to increase the corporate income tax by 10% to pay for childcare would make us one of the most expensive places to do business in the nation.

While the legislature considers these spending plans, which would increase costs on workers and employers, they are also hard at work ordering studies to limit the only economic development tools we have for the state to grow its revenue through job growth and economic revitalization without raising taxes. These economic development tools that are currently under the microscope total less than $3 million per year – 100 times less than the spending increases they are proposing.

According to Stanford University’s Institute for Economic Policy Research (SIEPR), taxes do affect a company’s hiring decisions. Even if a company can pass along payroll or other taxes to employees in the form of lower wages, increased taxes affect their ability to compete against employers in states with a lower tax burden (and we know that includes neighboring states, like New Hampshire). It also impacts their decisions on where to invest when expanding and locating facilities.

And this isn’t just about businesses because less business translates to fewer jobs and less opportunity for our youth – who we are trying so hard to retain. SIEPR also notes that “people tend to leave high-tax areas and move to areas where taxes are lower.” More out-migration also means fewer people to share the enormous tax expense of these well-meaning benefits for our residents. And it’s a vicious cycle, because fewer people make it harder for our businesses to grow – or even survive.

The impact of these costs will also fall directly on workers. According to data from Bureau of Labor Statistics and the MIT Living Wage Calculator, 81% of Vermonters already earn less than living wage of $68,000. An increase in payroll tax will decrease take-home wages for all working Vermonters and have an outsized impact on those below the living wage. Add increased income taxes, property taxes, and DMV fee increases on top of the payroll tax, and it is easy to see how these proposals will continue to squeeze those folks who are already struggling.

The Scott Administration hears daily about the financial strain families and businesses are having, but we need to get this message to many in the Legislature.

So, if you feel that you can personally handle more taxes or your business can leap yet another hurdle – adding to inflation, supply chain disruption, workforce and housing shortages, and the complicated, expensive, and restrictive permitting process – then do nothing.

But if the rising tax burden is jeopardizing your ability to live, work, play, or own a business in Vermont, please vocalize your concerns to your state senators and representatives. Let’s make sure all voices are heard in the democratic process.

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Joan Goldstein is the Commissioner of the Vermont Department of Economic Development, which is the department that works to improve the economic well-being and quality of life of Vermonters, while preserving our natural resources and community values.