$1,040 from Every Man, Woman and Child
Excluding federal funds, the state budget passed by the Legislature and signed by the Governor in 2011 required $2.954 billion in revenues extracted from the Vermont economy through taxes, fees, fines, assessments, settlements, etc. and deposited into various state funds. Such funds include the general fund, transportation fund, education fund, state health care resource fund, and special fund among others. For the 2016 budget, the current fiscal year, the comparable amount extracted from the Vermont economy is $3.607 billion, an increase of 22.1 percent or $652.6 million. Further, the Governor and Legislature have yet to resolve a pending $40 million deficit in the 2016 budget. The increase of $652.6 million alone equates to $1,040 for every man, woman and child in Vermont.
This 2011 to 2016 spending increase of 22.1 percent compares to state population growth of just 3/10ths of one percent, inflation growth totaling 7.7 percent and estimated gross state product (GSP) growth of 15.4 percent. Thus we now have a state budget serving about the same number of people as in 2011 but costing Vermont's economy and taxpayers $652.6 million more. If state spending had grown by even the most robust comparative indicator cited above, GSP at 15.4 percent, our government would be spending $197.7 million less and Vermont's families and businesses would have $197.7 million more in their pockets to save for retirement or a child's education, invest in their homes or businesses, support aging parents, pay bills or simply enjoy the benefits of their own labors. If state fund spending had simply kept pace with inflation since 2011, a reasonable proposition, rather than grow by 22.1 percent, Vermont's taxpayers would be paying $425.2 million less this year. Yes, that's $425.2 million, a lot of hard earned dollars.
The above $652.6 spending increase is beyond dispute. One can go to this Joint Fiscal Office link, scroll to page 32 and calculate this increase for oneself.
Yet, many advocates and political leaders and some news reporters and editorial writers somehow look past the inconvenient truth of $652.6 million in new spending to declare that state spending has actually been cut, even slashed. While some specific areas have been reduced, a routine occurrence in most every budget cycle, the facts show that state spending has grown by a staggering and unsustainable amount over the past 5 years.
Obviously these increased costs of our state government are not precisely distributed on a per capita basis. Some pay more and some pay less. As examples, Vermont's income tax is relative progressive, our sales tax includes exemptions that cushion the tax for some, and others receive income sensitivity benefits that lower the property tax or earned income tax credits that bolster the rewards of employment. However it's certain most everyone is paying more today to support state government's 22.1 percent spending increase. The Legislature's widely respected Blue Ribbon Tax Structure Report in 2011 came to the following conclusion:
"The Commission's work indicates that everyone pays taxes. This is most evident if one considers total tax contribution. Total tax contribution is the cumulative amount each taxpayer pays in state taxes considering all types of taxes, including income, sales, and property taxes. Remarkably, Vermont's taxes are distributed rather evenly across income classes when considering income, sales, and property together."
When examining total tax contributions for 2007, the Commission found that across income classes, Vermonters pay between 8 percent and 10 percent of their income in state taxes with middle income taxpayers paying at the higher rate. Given the $652.6 million increase over the past five years, it's likely most taxpayers are paying more of their income today. Further, in the face of numerous state government failures, from Vermont Health Connect to Act 46 to annual "budget gaps", it's likely most taxpayers would agree that a good portion of the $652. 6 million would have been better managed and used more beneficially if left in taxpayers' pockets.
This commentary is by Tom Pelham, formerly finance commissioner in the Dean administration, tax commissioner in the Douglas administration, a state representative elected as an independent and who served on the Appropriations Committee, and now a co-founder of Campaign for Vermont.
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