Vermont’s cumulative tax revenue in 2020 was 3.5 percent higher than the prior year, a figure that ranks us 6th best nationally, according to a Wall Street Journal survey.
That’s remarkable considering that in April of 2020 the Legislature’s economists were projecting a $430 million drop in Vermont’s tax receipts for the next fiscal year beginning July 1. That level reduction would have meant a dramatic property tax increase for Vermonters, unless another source of revenue were to be discovered. We were staring at the fiscal abyss.
What we know now, almost a year later, is that the fiscal projection didn’t come close to happening, and that the pandemic’s course will be shorter than first predicted.
What we also know is that the unknown source of revenue came, in large part, from the federal government in the form of checks sent from Washington to the states, and from the Treasury to our bank accounts.
But the reason Vermont has done as well as it has is that we rely on revenue generated from our income taxes more than other states. Our tax rates are also progressive. That helped considerably since the higher income taxpayers in Vermont are the ones who shoulder most of the burden and higher income taxpayers didn’t lose their jobs. We also rely less on consumption taxes than other states. When the bottom dropped out of the economy and shoppers stayed home, we didn’t suffer quite as much,
So the good news is that we are not confronting a future stained in buckets of red ink. We’re better off than we could have ever expected. To add to it, Congress has just sent to the president a $1.9 trillion stimulus package, of which Vermont will receive a total of $2.7 billion dollars, with $1.3 billion of that total going to state and local governments. On a per capita basis, Vermont will have fared better than almost any other state. As a state we are in much better shape going forward than most because of our positive revenue growth in 2020.
The question now is how it will be spent and according to what vision.
Let us hope a generation from now we don’t look back and ask why we did what we did.
Vermont truly has a pile of cash at its disposal that we had no reason to believe was coming our way. If Vermont’s revenue for 2020 exceeded the year prior, and if it remains relatively intact next fiscal year, then the $1.3 billion has the potential to be the catalyst for transformational change, the sort of change that helps us adapt to a quickly changing future.
And we have time. It doesn’t have to be spent until 2024.
The worst case outcome? That it would be disbursed to the outstretched hands of existing advocates skilled at the game. A continuation of the same.
Yet, that is the outcome most likely. Inertia is the most powerful force in politics and government. The way we are set up rewards what is in place. Advocates will argue that giving them more will yield more.
They are not wrong if the objective is linear. But it shouldn’t be.
One of the marks of our age is that is defined by disruption and it’s those disruptive forces, technological and otherwise, that must be addressed in a way that leaves the next generation protected and prepared. We need to take the time to figure out what those forces are and how they can be met.
An obvious example of this need is extending broadband capabilities to our rural areas. What Covid showed us is that working remotely is here to stay. What Covid showed us is that we have to have the technology in place to deliver education in new and better ways, including higher education. We learned that health care can be delivered in manners other than face-to-face meetings with the doctor.
Going into the pandemic our rural nature — from an economic development perspective — was a weakness. Our forced reaction to the pandemic has enabled us to look at rural Vermont with a different set of eyes. If we are able to extend broadband to all the nooks and crannies of Vermont, then looking ahead a generation, have we finally made some progress is spreading out the prosperity known to Chittenden County throughout Vermont? That has to be a goal.
If we combine the extension of broadband to our rural areas along with a reimagined use of Tax Increment Financing districts on a smaller, and more varied structure, will that bring the growth essential to our most rural environment?
For scale consider that $1.3 billion divided by Vermont’s 255 municipalities is roughly $5.1M for each.
This is a once in a life-time opportunity for Vermont. The best minds we have need to be drawn into this process. $2.7 billion is a lot of money to waste.
by Emerson Lynn