H.208 – Another disincentive to create jobs and wealth in Vermont

by Rob Roper

So, you’re a one-woman entrepreneur running a graphics design business. You’ve build up you client list, your reputation, and are now working hard to earn $100,000 a year. You’re ready to hire a young person right out of college for $25,000 a year to help take your business to the next level.

Or perhaps you’re a successful money manager who’s worked hard to succeed at a big city firm, but, now you want to downsize, start your own business – you, a partner or two, and an office assistant — in a more rural environment. Move somewhere that let’s you play as hard as you work, expand the local tax base and create a job or two.

Not so fast in Vermont.

Rather than figure out ways to encourage productive taxpayers to move to or stay in our state, Rep. Dave Sharpe (D-Bristol) has proposed a bill (H.208) that will provide such people with yet another disincentive. Sharpe would apply a tax surcharge to every business if the ratio of “highly compensated employees” is three times or greater the average of all other employees. The tax surcharge rate would range from 10 percent to 40 percent, depending upon the disparity of salaries.

Therefore, that two-person graphic design firm with the principle earning $100,000 and the new aide earning $25,000 would be whacked with a 20 percent surcharge tax. The money management office with two people, Certified Financial Analysts, making $165,000 and a secretary making $32,000 would be assessed a 40 percent surcharge tax.

Sharpe’s bill does not take into account disparities in education levels, skill levels, experience or capital at risk. He defines “highly compensated employees” as those with compensation of greater than $100,000 or owning more than 5% of the business.

At the very least, this is just one more thing — another hassle, another competitive disadvantage — businesses in Vermont will have to deal with.

Here we have another feel-good, “spread the wealth” bill that is poorly thought out not grounded in reality. If passed, it will serve only to drive capital investment, high paying jobs and the people who create them out of Vermont.

Rep. Sharpe is scheduled to testify in support of his bill before the House Commerce and Economic Development Committee this week. Members of that committee are:

Bill Botzow (D-Pownal), Chair

Mike Marcotte (R-Coventry), Vice Chair

Ernest Shand (D-Weathersfield), Ranking Member

Lynn Dickinson (R-St. Albans Town)

Herb Font-Russell (D-Rutland City)

Warren Kitzmiller (D-Montpelier)

Michelle Kupersmith (D-South Burlington), Clerk

Paul Ralston (D-Middlebury)

Heidi Scheuermann (R-Stowe)

Don Turner (R-Milton)

Sam Young (D-Albany)