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Report: Vt. economy doing better for top earners

By Keith Whitcomb Jr. [email protected]
MONTPELIER, Vt.— Vermont’s economy is doing okay, unless you’re middle to low-income, in which case the Great Recession never quite ended.

This is according to an annual report released Thursday by the Montpelier-based Public Assets Institute, which looked at economic data collected in 2018.

“An economist looking at Vermont statistics can see that the state is benefiting from the U.S. economic expansion, which became the longest on record last summer: There are more jobs, higher wages, fewer children in poverty,” reads the report. “At the same time, many Vermonters can look at their paychecks and wonder when the recession is going to end. The state’s economic growth continues to favor those who are well off, while low- and moderate-income families wait for things to pick up.”

The Public Assets Institute is a nonprofit think-tank that looks at Vermont’s economic policies from the perspective of the everyday citizen, said Paul A. Cillo, the group’s president, in an interview on Thursday. The Institute has existed since 2003 and has been releasing these “State of Working Vermont” reports since 2006.

The 2019 report can be found at http://bit.ly/Report1226

Cillo said the report is written with laypeople in mind, however it’s expected that legislators and policymakers will likely read it. It’s arranged in such a way that each item it examined is self-contained and can be readily shared with others.

While the report made no recommendations, it did take issue with how it says the state has gone about budgeting.

“For more than 20 years Montpelier has been guided by an unwritten policy: ‘Manage to the money.’ This means that the amount Vermont spends each year is determined not by the state’s needs but by how much money the current revenue system will generate in the next fiscal year. That principle has stifled more ambitious plans that would have required balancing needs and revenues,” reads the report.

It suggests that by not making key investments, the state has merely delayed financial reckonings.

“Two examples: In 1991, policy makers decided they couldn’t afford the recommended contributions to the state pension funds and started a 14-year stretch of underfunding. Now it’s costing much more to catch up,” reads the report. “State officials have been discussing pollution of Lake Champlain and other state waters for decades, but have not raised the money to reverse it. Now pollution has reached levels so dangerous that authorities are regularly closing beaches, and the costs of cleanup continue to rise.”

Lt. Governor David Zuckerman said Thursday he intends to read the report more thoroughly over the weekend, but as of Thursday afternoon noted that the document makes a good case for raising the minimum wage, something House Speaker Mitzi Johnson and Senate President Pro Tempore Tim Ashe have said is on their to-do list for the upcoming legislative session.

Zuckerman said that what things cost in Vermont is comparable to other New England states, less so is what the lowest earners are being paid.

According to the report, wages have been going up in Vermont, but not for those making the least, and not during a period of low unemployment, when one might expect paychecks to increase.

“In fact, from 2010 to 2018, these workers’ wages did not even keep pace with Vermont’s slowly growing economy, which increased 5.8 percent during the same period,” reads the report. “Wages for those at the top, however, grew faster than the overall economy.”

Tim Ashe, president pro tem of the Senate, agreed with Zuckerman’s assessment.

“The Public Assets report confirms for me that we need to increase the minimum wage to lift more people out of poverty and reduce their reliance on public programs,” he said Thursday. “It also reminds me how federal trade, tax and spending policies have screwed over people who aren’t rich.”

Tax cuts

The report found that changes to the federal tax system made since 2000, including the Tax Cuts and Jobs Act of 2017, mostly benefited wealthier Vermonters.

The richest 1% of Vermonters, on average, had an income of $1 million and in 2018 saw a federal tax break of $30,000. Vermont’s lowest earners, those making under $20,000 per year, saw a $350 cut. All told, the 20% making the most money got the most in tax cuts both in terms of actual dollars and compared to their incomes.

As for the state tax system, the report called it “minimally regressive.”

“In most states, low-and moderate-income people pay a larger share of their income in taxes than do the top 1 percent of taxpayers. In recent years, Vermont has increased progressivity, for instance, by curbing some tax breaks that favor people with higher incomes,” reads the report.

This was not high praise, as the report points out that Vermont was among five states that, according to the Institute on Taxation and Economic Policy, have tax systems that “do not worsen income inequality.”

Poverty

One in nine, or about 66,000, Vermonters were under the federal poverty threshold in 2018, according to the report.

“The total number of Vermonters in poverty exceeded the number before the Great Recession, but remained lower than the 2010 peak,” it reads. “While Vermont’s poverty rate, at 11 percent, was below the national average, the state rate did not budge much from last year and remained above the 18-year low of 8.5 percent in 2002. Vermont stood in the middle among New England states — New Hampshire, Massachusetts, and Connecticut had lower poverty rates.”

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