(06/26/05) Vermonters pay their state income tax begrudgingly and rarely does anyone volunteer to pay more than what’s due. For most, it is an unpleasant experience, made harder by knowing if we moved to New Hampshire or Florida we could save a lot of money. Many of us don’t take that dramatic step because we’re still here. But more and more, people are finding such a choice hard not to make.

People choose to live in Vermont for its quality of life, and taxes matter. It’s not unusual anymore for people to move to other states to reduce their tax burden. Many neighbors and friends have established residences out of Vermont to escape our extremely high tax burdens. So, now they rent here for three months during the summer to be with family and friends and call someplace else home.

A major role of state government is to grow our economy and to achieve that objective we need an adequate workforce. Between 1995 and 2000, Vermont’s population grew from 585,000 to 609,000. This is an increase, but a very modest one.

In his economic summit in Burlington this spring, Governor Douglas indicated we have the most colleges per capita but we lead the nation with our youth going to out of state colleges. Also, we lead the nation in 18-29 age group leaving this state. It’s sad to see our children abandoning Vermont to find job opportunities elsewhere.

The Goldwater Institute’s recent policy report, The Tax Man and the Moving Van: Fiscal Policy and State Population Shifts, Dr. Matthew Ladner examines the Census data to determine whether people do “vote with their feet” by moving from one state to another in response to state government policies that impact a state’s tax burden and business climate. It shows Vermont’s population increase between 1995 and 2000 was 4 percent, about 50% less than the national average. Dr. Ladner found that “relative amount of economic opportunity is a constant factor in drawing people from areas of low opportunity to areas of greater opportunity.”

Another study done by the State Business Tax Climate Index ranks the 50 states on how business friendly their tax systems are. Tax changes have an impact on a state’s competitiveness relative to its neighbors, as well as in the global market. The ten states with the lowest overall tax burden had the most state immigration between 1995 and 2000. Nine states and DC with the highest tax burdens had a net loss of almost 2 million residents in the same period. Vermont’s state and local tax burden is 6th highest in the country.

Ohio University’s Dr. Richard Vedder has written several papers showing states with the lowest tax burden prosper whereas high tax states show an exodus of people and have a dismal economy. He concludes that the market rewards efficiency; and the public punishes inefficiency and bad fiscal policy. From 1991 to 2001, Vermont’s disposable income, employment and gross state product grew less than the national average. In fact, Vermont’s ranking was near the bottom of our fifty states.

Tax change is not enacted in a vacuum. We need innovative ways to build a strong economy and discourage migration out of Vermont. However, policy decisions like the single payer/government control health care proposal and its funding will negatively impact our economy and further erode our employment base.

What lies in our power to do, lies in our power not to do. Policy makers need to establish a test to determine whether their decisions will influence people or businesses to move or remain in Vermont. The same test should be applied in keeping our state tax-competitive to attract quality employment.

Frank Mazur
South Burlington

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Frank Mazur is a small business owner and was a member of the Vermont House from 1995-2004. He’s also chair of the advisory board to FreedomWorks.com