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As states compete to attract new residents and increase their tax bases, two very different strategies have come to the forefront. At one end of the spectrum, states such as Vermont, which play class warfare with their tax codes, offer government goodies to lure new residents. On the other end of the spectrum, states such as New Hampshire, Vermont’s neighbor, are reducing taxes and regulations to entice productive citizens.
Why has Vermont stooped to this? According to the U.S. Census Bureau, the U.S. population has steadily increased since 2010, but Vermont’s population has gradually declined. (Only three other states — Connecticut, Illinois, and West Virginia — have had a net population decrease since 2010.) And a shrinking population means less government revenue.
There are reasons for this. Vermont’s income tax ranks among the most burdensome in the nation at 8.95 percent, and residents pay a whopping 6 percent sales tax. Add to that a plethora of local taxes and fees. This clashes with the more business-friendly, commonsense approach that its neighbor, New Hampshire, takes. The Granite State doesn’t tax most individual income. (Residents only pay a 5 percent flat tax on interest and dividend earnings.) Although both New England states have top corporate income tax rates of 8.5 percent, residents in New Hampshire are not subject to sales and excise taxes.
These policy differences add up in a big way. In Vermont, each resident pays an average tax of $4,594, while New Hampshire residents pay an average of $1,791. No wonder Vermont has less than half the population of New Hampshire.
This is why Vermont lawmakers are looking to “alternative” methods of attracting new residents. Their new Remote Worker Grant Program will pay up to $10,000 over two years the first 100 out-of-state workers who move to Vermont on or after January 1, 2019. To be eligible for the program, new residents must work remotely, full-time for an out-of-state employer. Lawmakers hope workers from across the country will move to Vermont to obtain the grant, and that they will stay long enough to pay back the grant in taxes.
But unfortunately, there’s a catch that makes the program almost useless. The grant only covers work expenses, including relocation, computer software and hardware, and Internet costs.
That aside, gimmicks like this are merely short-term solutions to a massive long-term problem that Vermont is refusing to face. According to the Mercatus Center’s 2017 State Fiscal Rankings, Vermont’s finances are among the worst in the country at 40th. Like many states that have engaged in reckless spending and excessive taxation, Vermont’s bill is coming due. The state needs to put its fiscal house in order, and it isn’t going to get there with its mix of tax increases and special handouts for prospective cash-cow workers who are willing to relocate.
Maybe it’s time for Vermont to take a page from the New Hampshire playbook instead, by lowering taxes to increase opportunities.
[Originally Published at Washington Examiner]