Commentary: Vermont Better Become Business Friendly ASAP (June, 2020)

By Rob Roper

Rob Roper

Due to the COVID-19 shutdown, Vermont has gone from one of the lowest unemployment rates in the country to one of the highest. According to the Vermont Commissioner on Labor, 90,000 Vermonters have applied for unemployment insurance. That’s out of a total workforce of about 340,000. As we come out the other side of this, putting policies into place that encourage rapid employment, capital investment in new and old businesses, and entrepreneurial creativity must be our number one priority. Policies that present obstacles to this must be set aside or removed. 

Even before COVID when the nation’s economy was booming, Vermont was struggling under the burden of high taxes and complicated regulation. So much so that in January the British financial magazine The Economist noted in an article titled, As wages grow across America, one state is left behind, that, “In the past decade Vermont’s gdp has grown at two-thirds the rate of America’s. Critics point to a mountain of red tape and regulation.” Because of that red tape and regulation, Vermont never really recovered from the last recession. This was bad enough then; it is unacceptable now.

Current estimates show Vermont facing as much as a $430 million budget shortfall for the 2021 budget year. We are looking at a potential 25 percent property tax increase to cover the prek-12 education budget. Potential tax increases discussed to fill the hole include increasing the 6 percent sales tax by a penny or two, expanding the sales tax to services, adding or increasing “sin” taxes to candy, sugary drinks, and tobacco products, taxing clothing over $150, and taxing “cloud” based services.

Respectfully speaking, this is not the way to go. Thinking of my barber, who has had to close her shop and forgo income for two months, is the legislature really going to tell her that as she tries to open back up she’s going to have to shoulder a massive property tax increase on her small Main Street shop and start collecting, tracking and remitting a new sales tax for which she will have to increase prices on her also financially strapped customers? This is not how to re-open an economy.

Additionally, the Vermont legislature has been hostile to people working as or employing independent contractors, even when both sides are desirous of the arrangement. This has to stop. The sad reality is that many businesses will not be able to reopen even when allowed. We are going to need new businesses cropping up in their place. People are going to have to be creative in finding employment for themselves and others, and the state is going to have to take steps to make it easier, not harder, for them to do so.

And, lastly, we need to reform our tax structure in such a way as to attract large amounts of private investment capital, which means allowing for competitive returns on investment. High up-front regulatory costs coupled with confiscatory tax rates – our current policy — is the opposite of how to do this. Vermont legislators have preferred an economic growth model of picking winners and losers, subsidizing with tax money the endeavors of the favored, and crushing with taxes and red tape the unwanted (at least according to them). This approach was failing before the economic crisis, and it is an impossible formula now.

It is, therefore, disheartening to see the Vermont Senate taking up bills like the Global Warming Solutions Act, as this bill’s purpose is to quash economic activity that results in greenhouse gas emissions – which is nearly all economic activity. If ever there was a wrong place and time for a piece of legislation, this is it.

Vermont has a reputation for being unfriendly to job creation. All the rankings put out by financial publications, tax watchdog groups, etc. place our state at or near the bottom. We must  move quickly to reverse both the reality and the perception of this or we’re going to be in real trouble for a long time.

Moving forward, helping people get back to work and rebuilding their financial security has to be the number one objective of every state policy, whether it is returning to an old job that’s coming back on-line, moving into a new job that didn’t exist before, or creating a job for one’s self where no other job is available. Every policy should be examined through that lens. 

If we continue down the policy path that choked off Vermont’s ability to recover from the last recession, we will never, ever recover from this one.

Rob Roper is president of the Ethan Allen Institute.

{ 1 comment… read it below or add one }

ROBERT J HOLDEN June 13, 2020 at 12:55 pm

Is this newsletter provided to all of our legislators through Email…or mailing. It should be so they know what we are thinking.

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The Ethan Allen Institute is Vermont’s free-market public policy research and education organization. Founded in 1993, we are one of fifty-plus similar but independent state-level, public policy organizations around the country which exchange ideas and information through the State Policy Network.
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