The Ethan Allen Institute (John McLaughry and his team) have published a sobering report on the likely road ahead fueled by the inexorable forces of demographics and Vermont's proclivity for spending. He is correct.
Vermont simply cannot sustain its appetites for spending, yet few in the state seem willing to make the difficult policy choices that will enable our kids to pay for the lifestyle and desires so frequently expressed by our politicians. Below is the executive summary. Well worth reading, and contemplating the consequences.
Executive Summary
Despite high property taxes and many unmet social needs, these are, for our state, very good times. But a long-range analysis of projected demographic trends and their economic implications suggests that Vermont may be steadily headingoff the rails.
Vermont's population is getting older. Soon Vermont will become the nation's oldest state. More of its young people are seeking opportunity elsewhere. The proportion of active wealth producers is declining. But Vermont's high level of public service spending, especially on public education and human services, is requiring ever-greater tax revenues. There is little reason to believe that over the next 25 years Vermont's taxpayers will be willing and able to pay enough to support the state's spending habits.
By 2030, even if Vermonters are willing to devote an all time high of 18% of their adjusted gross incomes to state and local taxes, more than two thirds of all tax dollars collected will be needed just to pay for public education. Almost all of the remaining tax dollars will be required to fund human service programs. And that assumes there will be no new spending programs, like universal preschools or universal taxpayer-financed health care.
The good news is that this problem is not beyond our control. We can slow the growth of spending for both public K-12 education and human services. We can also create a much more favorable climate for investment, entrepreneurial opportunity, and economic growth. That will increase incomes, enlarge the revenue base, and reduce the rising tax burden. Increasing tax rates in an attempt to increase government revenues is not a viable option. That would propel Vermont from fifth place to first place in state and local tax burden. Such a tax burden would doom the state's efforts to stimulate wealth producing economic growth.
Keeping Vermont on the rails will require transforming Vermont into a state more attractive for productive young Vermonters to stay and work in, and for productive workers from outside the state to migrate into. This will require changing the state's tax and regulatory policies. It will require improving its educational and work force quality, strengthening its institutions of post-secondary education, and expanding its telecommunications system. It will also require maintaining the high quality of the state's health care system and protecting its environmental amenities.
Those steps would make Vermont more attractive to existing businesses and to new firms that base their enterprise on highly educated, skilled, high-salaried workers. A conscious decision to implement such policies will take vision and political courage. It will mean creating a much more favorable climate for investment, entrepreneurial opportunity, and economic growth, and resisting the political temptation to pick and subsidize favored enterprises. It will mean putting limits on the state government's role as the provider of tax-funded benefits to an increasing proportion of the state's population.
But if Vermont's government and economy are to stay on the rails for our children's generation, there seems to be no other viable choice. We do not have decades to get this right.
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