Vermont’s High Tax Burden Quantified – Again

by Robert Maynard

Free market proponents have been insisting for years that Vermont’s tax burden is relatively high compared to other states in the nation and that our high tax burden is a drag on our economic prosperity.  Year after year state by state analyses of tax burdens around the country have confirmed this assertion.  The latest such confirmation is The Tax Foundation’s 2013 State Business Tax Climate report.  The results of this report were presented in this MSM article.  Here is how the article described the report’s approach:

With the passage of the fiscal cliff deal and the expiration of the payroll tax holiday, most Americans will be paying more taxes this year — but the hike could hurt more depending on what state you live in.

The Tax Foundation’s 2013 State Business Tax Climate report recently ranked the best and worst states for taxes to enable business leaders, policymakers and taxpayers understand how their states measure up. The 10 best include low-population, Western states including Wyoming and South Dakota, as well as a few eastern states like New Hampshire and Florida. And what did they have in common? They had low rates or lacked one of the five major taxes — individual income, corporate, property, sales or unemployment insurance.

According to the report, the lesson is simple: A state that raises sufficient revenue without one of the major taxes, all things being equal, has an advantage over those states that levy every tax in the book. They’ll be more competitive in attracting new business and more effective at generating economic and employment growth, since high taxes are a turn-off for both businesses and individuals.

The 10 worst all levied complex, non-neutral taxes that favor some economic activities over others and have comparatively high individual and corporate tax rates.

“Multiple layers of data (show) that domestic migration occurs consistently away from high tax states,” says Mat Franken, founder of ResidencyHQ, a resource for residency information. “Our data points to high-tax states losing residents to low-tax states.”

The big question is how did Vermont fare.  According to the report, Vermont has the nation’s fourth highest tax burden.  Here is an explanation of our ranking: “Vermont gets slammed for high property taxes, which are the third highest in the nation with a 5.27 % effective rate. The state’s high individual income tax rate (the top marginal individual income tax is 8.95%) and high corporate tax rates helped it earn its spot as the fourth-worst tax state in the nation.”

I suppose that we should be thankful that we are not the highest taxed state.  Of course, we are likely to vault into that position by a significant margin should we be foolish enough to go through with Green Mountain Care and end up having to raise the taxes necessary to fund it.