Vermont’s Spending(11/03) A few months ago I received the following e-mail from a Fletcher Allen nurse who expressed frustration at Vermont’s high taxes.
“When I get up in the morning to go to work, turning on a light, I’m taxed. I’m taxed through the night for property, more electricity, heat and TV, phone, food I purchase for breakfast. I start my taxed car, run taxed fuel, taxed oil changes, on taxed tires, then drive to FAHC on roads less maintained than those I’ve seen in Afghanistan. I work at least 10 hours a day so I can be taxed 40% of my pay… The legislature is sucking the cash cow dry one percent at a time.”A report recently released by the Small Business Survival Committee (SBSC) ranked states’ fiscal responsibility from 1992–2000. The Committee is a small business advocacy group located in Washington, DC.Vermont ranked 48th in terms of increased state spending between 1992 and 2000. Only Oregon and Mississippi did worse. Correspondingly, New Hampshire’s ranking is 14th. On a per capita basis, Vermont’s ranking remained the same.
If you look at spending per capita from 1992 to 2000, Vermont increased 62.5% compared to a 16.4% inflation rate during the same time period. Total state spending increased close to 4 times inflation. To look at it another way, if state spending increased at the inflation rate each year, Vermont’s spending would have decreased $1,504 per person in 2000 and that equals $915 million in savings, almost equal what we spend for education in one year.
State and local spending per capita in Vermont rose 36% and that’s a little over 2x the inflation rate over that same time. Again, if per capital state and local spending increased at the inflation rate, state and local governments would save $899 a person in 2000 and that would total more than $547 million alone.
Spending per capita in New Hampshire increased 36%, close to 1/2 Vermont’s rate whereas state and local spending per capita rose by 22.4%, significantly less than Vermont’s growth rate.
This past decade had unparalleled growth with low inflation. It also had war, uncertainties and September 11th that contributed to the budget problem states are experiencing. The problem facing states is clear and that is excessive spending. In Vermont, Governor Dean exacerbated the problem by creating a flexible budget that spent surpluses as “one time” investments thereby creating an appetite to spend more each year.
A bigger share of our resources is taken when government spending increases faster than our inflation rate. That affects productivity since money taken from consumers and small business stifles spending, investment and innovation and that is a real negative impact on our economy over the long run.
Vermont’s Personal Income Tax
SBSC recently released its index on state personal income tax rates. This ranking is important because it impacts decisions regarding where people live, work, invest and take risks. Also, most businesses pay personal income tax rather than corporate income tax.
Vermont’s 48th ranking places it in the lowest quartile with its top personal income tax of 9.5%. New Hampshire’s raking was #1 since they have no personal income tax.
To the Fletcher Allen nurse concerned about our taxes, “it’s only a penny on the dollar” back door fiscal policy does add up and that’s reflected in our poor rankings. There’s no good reason for it. Just past government policy.
Thank you for your calls and notes. I can be reached at 658-3975 (home), 1-800-322-5616 or 228-2228 (State House) and via e-mail.
Rep. Frank Mazur
South Burlington