Montpelier Leadership Should Look to its Left (or maybe Back?)

by Martin Harris

Only a fairly few governing (taxing, spending, regulating, stimulating) jurisdictions in the US enjoy the luxury of disdaining economic growth for “sustainability”, meaning that they plan on meeting their ever-increasing revenue needs not with traditional private-sector productivity expansion, but by enticing ever-more passive-income taxpayers in, and/or by ever-more taxation of present residents (the Vermont model) and those jurisdictions are mostly smaller Sun-Belt, water-front, or pretty-mountains counties, like those in exurban Arizona, sea-shore Maine, and the Appalachian Carolina’s. Of the Nation’s two smallest (by population-count) States, Vermont is last on the rankings of Gross State Product, for 2013 at $26.4 billion, arguably by anti-business policy choice, and Wyoming is #48 with $38.2 billion, arguably by pro-business policy choice, a contrast which shows up better in the rankings for GDP per capita: Vermont at #30 and Wyoming at #5. You can see the neat little chart on the WikiPedia site. You’ll not be surprised to learn that the District of Columbia is #1, even though it neither grows nor mines nor manufactures much of significant new-wealth-creation (not transfer, at which its denizens excel) value. States without that luxury, typically because they’re more urban and therefore have more transfer demands, have little choice but to try to attract industry and commerce, tax-plusses which, via levies on property and earnings, pay into State coffers far more than they require in jurisdictional service costs. Those which succeed at that recruitment effort (think Texas) prosper economically; those which fail (think California) find themselves in the sort of downward spiral now best exemplified by the Nation’s one-time industrial-wealth and middle-class prosperity star, the about-to-enter-bankruptcy City of Detroit. Somewhere in the middle, policy-, recruitment- and success-wise, is the Empire State.

New York used to be to the Left of Vermont, both map-wise and politics-wise, but now it’s (perhaps unwillingly?) paying its grudging respects to private industry and free enterprise by mounting a new effort to attract just those “malefactors of great wealth” (a little FDR anti-business Progressive disdain-rhetoric, there) in, to set up shop, employ people, create wealth, and eventually surrender some of that in taxes, largely but not entirely for the unearned benefit of those of its citizenry who don’t. A recent full-page ad in The Wall Street Journal pleads (in all-caps big black block letters best not reproduced here): “Welcome to the new New York. Bring us your business, pay no taxes. Introducing Start-Up NY. Discover all the ways New York is taking care of business.” In the fine print, the Albany promise is “no taxes for 10 years; no state, local, corporate, business, or property”. That’s not quite completely honest: the unspoken corollary to the 10-year tax-holiday pledge is the new taxes which will flow from Day 1 from the levies on the personal income created by the new jobs. And New York State (more precisely, its Albany leadership) has quite a pre-existing reputation in this respect: the 2013 issue of the “50 State Comparisons” published by The Taxpayers Network shows (Table 36) NY as #50 in the Nation for overall “business tax climate” and #50 in the Nation for “individual income tax”. VT is “only” #47 in both those rankings, while WY is #1.

Montpelier’s leaders wouldn’t (a little Humble Scribe guesstimate, here) deign to emulate Wyoming’s governance/economic strategy: it’s been based on the mining of coal (ugh) for the production of electric power elsewhere (ugh) and the raising of beef (ugh) for the consumption by meat-eaters (double-ugh) elsewhere, the sort of primary-industry activities only primitive economies (excluding hand-labor mini-farming for local-vore admiration, of course) would deign to engage in. Now Wyoming is going high-tech: its governance wants to stimulate the broad-band industry and become its national model, and maybe that would gain more up-scale Vermont approval. But Montpelier’s leaders might want to look to their Left to see whether a State with even more anti-business baggage than Vermont can attract industry for tax purposes (employee income now, business property later) and, more importantly, whether Albany’s leaders are perceptive (and skillful) enough to seduce only the real tax-plusses, and not the sorts of low-per-employee-capital-investment low-wage industries (think meat-packing in the Midwest) which score out as tax-minusses because their mostly-low-skill employees don’t earn enough to afford nicely taxable housing, send more than their statistical share of kids to “free” public school, and make all the other usual demands for subsidized or free public services for which Progressives love (and need) to be credited, with grateful votes, for dispensing. Which, of course, is why such governances need ever-more in tax revenues, if they’re to succeed in the never-ending task: Re-Election as Job 1. In that respect, the odds for Albany success aren’t good: Progressively-governed States and cities across the Nation have tried for another sort of (supposed) tax-plus, the sports stadium, with similar variations on the Tax-Increment Financing model, with fairly dismal results. Maybe, instead of looking Left geography-wise, the Dear Leaders in Montpelier should look Back chronology-wise.

That’s because Progressives used to be wiser about such things than they are today: case in point, the ultimately-abandoned (we non-Progressives still don’t know why) effort of the newly-elected (1962) Hoff Administration to, with sophisticated and effective (of course) skillful governance stimulus, re-cast Vermont as “the Education State” , and to attract a lean-green, and high-investment-value high-employee-skill and -pay (and, for all those reasons, tax-plus) research-lab industry in the Green Mountains, just as the dairy industry was beginning its implosion of small-scale family farming triggered by the regulatory shift from 40-quart cans to refrigerated bulk tanks. Re-constituted today, it might not even need to promise a 10-year tax holiday to attract candidates.