Commentary: Vermont needs a better plan for job creation (February, 2014)

by Rob Roper Rob Roper

The past year has been a hard one on Vermont employees. For example, IBM, Vermont’s long-time top private employer laid off 419 workers from its Essex facility last summer and just announced another 140 jobs will go. Up north, Energizer closed its St. Albans factory in September, costing us 165 jobs. Down south, just this past month Plasan Carbon Composites of Bennington announced it is moving to Michigan along with 143 more jobs. Vermont Yankee and its 600 plus jobs, which average over $100,000 per year salaries, will close its doors at the end of 2014.

People can argue over why these companies left or downsized. Is it state policy, or other factors beyond the state’s control, or a combination of both? Each case is different, and in each case myriad factors certainly influenced the final decisions. Companies operating in free markets will always be opening, closing, and moving. But, one thing is for certain: Vermont needs an effective strategy to attract new good-paying, tax-revenue-generating jobs to replace the one’s we’ve lost at least as fast as we’re losing them.

Other states are being very aggressive in this regard. One neighbor, New York, is advertising Governor Cuomo’s plan to revitalize its economy by offering companies ten years of tax-free existence for starting, relocating or expanding businesses in specific enterprise zones. “Business will be able to locate in these zones and operate 100% tax-free for 10 years. No income tax. No business or corporate state or local taxes. No sales tax. No property tax. No franchise fees,” boasts the program website.

Michigan, which poached Plasan out of Bennington, succeeded in doing so by offering the company nearly $5 million in tax credits.

When Huber + Suhner left Vermont in October, 2013, taking 63 jobs to North Carolina and New Jersey, the company’s president explained, “Obviously, the cost of doing business [in Vermont] and the tax perspective is a significant reason why we’re moving.” North Carolina had just instituted a series of tax reforms, including cuts to income tax rates, corporate tax rates, property taxes, capping the gasoline tax, and fully repealing the estate tax.

The common theme here is that employers are looking for favorable tax environments of one kind or another, and are rewarding the states that provide them. Given that fact, how should we expect employers to react to what’s being discussed in the Vermont State House today?

Here, a prospective employer is looking at the potential for a 13% to 16% plus payroll tax to pay for single payer healthcare (S.252). An increase in the minimum wage to $12.50 or as much as $15/hour (H.433, H.552, H770, S.301). Government mandated paid sick leave for employees (H.208, S.255). A 0.25% increase in the Rooms & Meals tax (H.586). A 7¢ per $100 of assessed value property tax increase to $1.01 for residential properties and $1.51 for commercial. And, all this would be on top of an existing reputation as a high-tax, business-unfriendly state.

We are surrounded by Boston, New York, Montreal — 80 million people in the surrounding metropolitan markets — with a plethora of high paying, fairly mobile jobs in finance, communications, arts and entertainment, high tech, software, law, etc. What would it take to entice folks in these kinds of high-wage, low-environmental-impact industries to move to Vermont and hang out their shingles?

I suspect the answer would have a lot to do with lower taxes: a message of “Come to Vermont, bring your business, keep more of what you earn, and spend it living in the greatest lifestyle experience New England has to offer.” Such a pitch would require serious policies to back it up. This is what Vermont should be doing to grow the economic pie, but we’re not making that offer. Quite the opposite.

A friend who is an entrepreneur and software engineer recently crunched the numbers on what a total tax burden for a family of five living in Burlington and earning $90,000 a year would look like if the single payer payroll tax took effect. Of that $90,000 salary, $53,982.80 would go to pay one form of tax or another — $16,222.80 for state and federal income tax, $11,160 FICA tax, $12,600 payroll tax, $1000 for state and federal unemployment tax and workers comp, plus $11,500 in property taxes and an estimated $1500 for sales taxes.

Most people are going to look at that and say, you know, that’s way more than my fair share, and head off Michigan or North Carolina, or across the boarder to New Hampshire. We’ve only ourselves to blame.

- Rob Roper is president of the Ethan Allen Institute

 

{ 2 comments… read them below or add one }

Armand Dion March 3, 2014 at 4:54 pm

100%right. What is it going to take to wake up the folks in Montpelier , that their policies are going to kill all hope of this sate retaining their young people and growing the private sector. Pretty soon there will be not enough tax payers to support all these programs that the government has and continues to enact. WAke up legislators!!

Reply

Pat Clifford March 14, 2014 at 6:17 pm

So those of us left behind will continue to shoulder more of the burden.Why do we keep voting Democrat? I suspect that will eventually change when the liberal pocketbooks have been emptied.

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