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Discussion about taxes is not based on facts

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Posted on September 6, 2010 |
By Doug Hoffer



There is much that could be said about the Lt. Governor’s economic development plan and his recent press event announcing his economic plan, but for now I want to comment briefly about one of Mr. Dubie’s statements. He said that Vermont’s state income tax was higher than Maine, Massachusetts or Rhode Island.

This statement is terribly misleading and should be corrected.

1. It is disingenuous to talk about Vermont’s “income tax” for the simple reason that Vermont does not have one income tax. It has a progressive tax system so residents pay at very different rates depending on their income. I am certain Mr. Dubie knows this, so it makes me wonder why he would use such language.

2. I suspect that Mr. Dubie was referring to the top marginal rate (which only applies to less than 1 percent of all tax filers). But even this can easily be misunderstood because of the differences between states as to where the top bracket kicks in.

For example, Maine’s top rate is a bit lower than Vermont’s, but it kicks in for the first dollar over $19,750. In Vermont, the top rate does not apply until the first dollar over $372,951. This has very significant implications for actual tax liabilities. Mr. Dubie’s inference is no less false for being commonplace.

3. Because of the differences between state tax systems, the actual taxes paid by residents of different states is not at all what Mr. Dubie would have us believe. This was illustrated nicely by the Legislature’s Joint Fiscal Office in Vol. 2 of the 2007 Tax Study.

The table below shows clearly that Mr. Dubie’s assertion is simply not true. Figures are for state income tax and reflect rates in effect in 2006.

Single homeowner > 65
Single Renter
Married Homeowner (2 kids)
Married Homeowner (2 kids)
Married Homeowner (3 kids)
Married Homeowner (2 kids)
Income
$19,429
$24,500
$80,743
$109,320
$357,934
$1,066,309
State
Maine
$385
$833
$3,004
$5,217
$23,417
$79,591
Mass.
$855
$852
$3,073
$5,261
$18,030
$56,023
Vermont
$358
$589
$1,406
$3,494 
$20,872 
$72,760

As is clear, Vermont filers do rather well compared to these two other states (Rhode Island was not part of the JFO sample).

The discourse on economic development and tax policy are too important to be based on misinformation. Sadly, that has been the case for much of the last eight years. It’s unfortunate that Mr. Dubie is picking up where Jim Douglas left off. We deserve better.

It is also important to note that, like his mentor Jim Douglas, Mr. Dubie looks only at the so-called tax burden rather than both sides of the equation. As I pointed out on the most recent Job Gap Study, Vermont’s quality of life indicators (all heavily influenced by public expenditures) are much better than many states with lower tax rates and smaller governments.

Mr. Dubie, be careful what you wish for.

Doug Hoffer, the Democratic candidate for state auditor, has been a self-employed policy analyst for nearly two decades and is the author of the “Vermont Job Gap Study,” which is a series of 10 reports begun in 1997.

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