When rich Vermonters die, their kids aren’t the only ones who get a windfall. The state is a beneficiary, too, taking a 16 percent cut of the value of estates over $2.75 million.
Vermont is one of just 12 states that still have an estate tax — or, as critics call it, a death tax. Most others ditched theirs after a 2001 federal tax overhaul.
Gov. Phil Scott thinks the tax chases wealthy families out of Vermont, ultimately starving the state of steadier revenue streams that would be collected before they die, such as income and sales taxes. So in his proposed budget, now being hotly debated by the legislature, he called for a big tax break for wealthy Vermont families in the hopes they’ll keep their greenbacks in the Green Mountain State.
The plan has reignited a long-simmering policy debate over whether Vermont’s tax burden is so high that it’s driving people to states with lower taxes. Though there’s no conclusive data to prove this theory, those who believe it have plenty of anecdotal evidence.
“The ones with all the money are checking out,” said Pat Robins, cofounder of the SymQuest Group, a South Burlington technology services company he sold in 2015. “I know, because a lot of them are friends of mine.”
It’s one thing to ask the wealthy to pay taxes on their own income or properties, he said, but it’s another to tax what they’re trying to pass on to their children. Many can and do leave the state to protect those assets, he argued, depriving Vermont of the taxes and economic activity they would have otherwise generated.
“I think we’re slowly strangling the golden goose,” Robins said.
Paul Cillo doesn’t buy it. The executive director of the Public Assets Institute in Montpelier said he’s heard this claim for years and has never seen any evidence to back it up.
“This convention about people leaving any state as a result of tax changes is nonsense,” Cillo said. “It’s basically an argument without substance.”
People move for jobs, to be closer to family or for better weather, but not to flee higher taxes, he said. Studies done after states have imposed taxes on millionaires have debunked the claim, he said. One 2011 study by the nonprofit Center on Budget and Policy Priorities was titled “Tax Flight Is a Myth: Higher State Taxes Bring More Revenue, Not More Migration.”
“What happens is, people pretty much stay put,” Cillo said.
The number of people coming into the state mostly makes up for those who leave, he added, creating a population churn that is not only natural but healthy.
Tax Commissioner Kaj Samsom disagrees. The state should not be satisfied to simply replace departing residents with new ones, he said, calling it a recipe for stagnation.
“Clearly, for the Scott administration, success is not equilibrium,” Samsom said.
The goal should be to increase the number of high-income residents by continuing to attract new ones and encouraging people to stay, he argued.
Vermont has a relatively progressive tax structure, meaning rates increase as people’s incomes do. The problem, according to Samsom, is that the state has few wealthy people compared to others.
It ranks 41st in the nation by one key measure of wealth: the average income of the top 1 percent of taxpayers. Connecticut tops the charts at $3.2 million. Vermont is at $1 million, according to the nonpartisan Institute on Taxation and Economic Policy.
“A progressive tax structure doesn’t do what you want it to do if the high income and high wealth is not there,” Samsom said.
A $10 million estate today would enjoy a $2.75 million exemption and be assessed at $1.16 million in taxes. Scott’s plan would bump up that exemption to $5.75 million, slashing that same estate’s tax bill to $680,000 — and saving the heirs $480,000.
All told, the Department of Taxes estimates that the state would give up about $10 million per year in revenue if the proposal became law, a change that would be phased in over several years.
Financial professionals have been telling the state for years that its tax structure in general, and the estate tax in particular, contributes to driving well-off people elsewhere, Samsom said.
Rebecca Walsh, a financial planner with Pathway Financial Advisors in South Burlington, said there is broad consensus in her industry on this point.
“Every financial planner, attorney and accountant I’ve spoken to about this issue has handfuls of anecdotes of clients who decide to establish residency in another state while keeping a foot in Vermont, to reduce their income [tax] and estate tax liabilities,” Walsh said.
People with multimillion-dollar estates usually own homes in other states, often in warmer climates, so shifting their residency is not difficult, Walsh said.
States such as Florida generally require legal residents to be physically present for six months plus a day, which is not that much longer than the de facto Vermont winter. And the cost of airfare twice a year, Walsh noted, is far from prohibitive for someone with a $10 million estate.
“That range of wealthy clients have a lot of flexibility on how to live their lives,” she said.
According to Rick Kozlowski, a Burlington attorney who specializes in estate planning, the combination of state income and estate taxes pushes Vermonters to leave — or, in legal terms, change their domicile.
“It’s the hit to their income combined with knowing that when they’re gone, their kids will be writing out a big check to the State of Vermont,” Kozlowski said. “It riles them as unfair. They’re thinking, Why should I give 16 percent of what I’ve earned and saved over my life to the State of Vermont just for the privilege of being there?”
To reduce their exposure to the estate tax, many clients instead give money to their children while they are alive, Kozlowski said. As long as the parent lives for two years after making such a gift, it is not taxable, he added. So, a person who gives an adult child $1 million can avoid paying $160,000 in estate taxes after death.
The administration faces several challenges in making its case to reform the estate tax.
One is a data problem. No information clearly shows how many people leave the state due to the tax. Samsom’s department knows how many Vermonters change their tax domicile, but it doesn’t know why.
The department recently tried to analyze the exodus. It examined tax data from 2017, looking at returns from nonresidents who used to file taxes as Vermonters but still have to make disclosures based on Vermont income. Someone who now lives in Florida for more than six months of the year, for example, might still have a rental property in Vermont on which they have to pay state income tax, Samsom explained.
The analysis found that 422 nonresidents who were over 60 years old and made more than $200,000 per year filed returns with the state. Of those, 200 had moved from Vermont to states without an income or estate tax. The top two destinations were Florida (136) and New Hampshire (45).
This suggests to Samsom that while climate is certainly a motivator for people to move elsewhere, tax benefits are also clearly part of the equation.
Cillo said that such analysis fails to consider that a similar number of people in that income range likely moved into the state. In 2016, 420 such people moved out and 401 moved in, he said, citing Internal Revenue Service data.
Samsom countered that a closer look at the data shows there are fewer high-income residents coming into the state than leaving, and those that are replacing them are earning an average of $50,000 a year less.
He also noted that it wouldn’t take that many more people staying in the state to recoup from other sources the drop in estate tax revenue. A typical resident earning more than $300,000 per year generates about $40,000 in a suite of other taxes, the department estimated.
People don’t change their retirement plans on a dime. But if over the next 15 years just 17 more retirees per year decide to keep their tax home in Vermont than would have otherwise, the state could recoup the $10 million annually. The more high-income residents who stay, the faster the state would not only recoup the lost revenue but exceed it.
Rep. Janet Ancel (D-Calais) isn’t convinced that lowering the tax would really change the retirement patterns of the wealthy.
“I don’t think the data proves or really even demonstrates that,” said Ancel, the chair of the tax-writing House Ways and Means Committee. “There are a lot of reasons people move.”
But she does think the estate tax contributes to the impression of the state as high-tax, and there might be fairer, broader ways to make up similar revenue. That’s why her committee recently supported raising the exemption, but only to $5 million, instead of the governor’s proposed $5.75 million. To compensate, the committee proposed raising $5 million by expanding the capital gains tax, which targets the sale of land and businesses.
The full House approved the change as part of a tax bill that now heads to the Senate.
There are signs that it may be in for a cool reception.
Sen. Chris Pearson (P/D-Chittenden) said he was “astounded” when Gov. Scott proposed in his budget address to reduce the tax burden on wealthy families.
“That is a segment of the population that I’m not fretting about,” said Pearson, who sits on the Senate Finance Committee. He said he was surprised to see the House “essentially advance the governor’s proposal” and said he’ll need some serious convincing to support it.
“To me, the onus is on folks to really clearly and unequivocally prove that we have a drain of wealthy families in Vermont,” Pearson said. “I just don’t see it.”
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This article appears in Apr 3-9, 2019.
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Here is some data from IRS about tax filers with AGI of $200,000 or more from 2012 to 2016:
1,520 left Vermont
1,646 entered Vermont
Net gain of 126
I make under 50k a year. I left because of your taxes and cost of living.
There’s plenty of organizations that have compiled moving data and the trend is absolutely that people leave high tax states for lower ones.
Of course it’s not the only reason. No one on the planet claims it’s a one cause issue.
What’s Vermonts trend overall? Isn’t the general claim that VT is just for the wealthy?
And it’s rather easy to “loophole” the death tax. You spend your money on stuff for your kids beforehand.
https://fee.org/articles/americans-are-lea…
https://thehill.com/opinion/finance/429623…
https://www.usatoday.com/story/money/econo…
“The population of Vermont declined by 0.2% in 2016, the third largest contraction of any state. “
Mr. / Ms. Doom
I prefer to get data from official sources rather than the media.
Population changes result from several factors including births & deaths, immigration, and domestic migration. It is the last that this article addresses.
According to the IRS, half the states are losing tax filers due to interstate migration, not just Vermont. Much of the domestic migration reflects the Baby Boomers moving to the sun. And as I pointed out below, more high end tax filers moved into VT than moved out from 2012 to 2016 (latest data available).
Are we losing? Yes. Is it huge? No. Is it just VT? No.
And btw – Seniors are leaving (supposedly) tax-friendly NH at the same rate as in VT. Go figure?
Those articles used the census bureau data, and linked to it. I guess I should have just linked directly there.
And I said there’s always multiple factors in moving. The trend is obvious. CT, NY, California all big losers. Florida and Texas are big winners.
NH has net migration, even if it is cold. Old people leave the cold. VT has a problem when it’s youth flee too.
It’s usually not only personal tax, but business opportunities as well. https://www.freedominthe50states.org
Colorado makes up for it’s income tax with other things.
If it was simply based on where it’s warm you wouldn’t also see people leaving California. Or Montana gaining people.
You also didn’t seem to care about natural growth when citing VT gaining a whole 126 families making 200k.
We should look at other states data of 200k people to see the overall trend.
All this to say,the death tax isn’t probably the only reason people would leave a place. It’s still a horrible tax that isn’t needed. People still tend to avoid taxes, and if moving can be a way to avoid them, people will do this in the aggregate.
You said, “We should look at other states data of 200k people to see the overall trend.”
I did (sse my first post). Even with our overall net negative outflow, VT is one of 23 states with a net positive domestic migration rate for those earning more than $200,000.
Facts matter.
So nothing about people who naturally went into that bracket. 2012- 2016 could be accounted for by more of the recovery from the recession. Top 23? What number? If you’re twenty third, you’re essentially the middle. Yes, Vermont has done better than other high tax states. But not by much, and not enough to dispel the arguments put forth by low tax states. There’s absolutely an overall trend of people leaving of various tax brackets.
The overall trend is people out. The recent tax law change will have an affect, and economists are arguing to what extent people will leave high tax states.
Personally I know four “Vermont” millionaires, each has moved to primary residences in tax friendly states (AZ, CO, FL, TX) while “vacationing” here in Vermont, documenting their stay so they can prove they are here less than 183 days each year ! Each of these state have no inheritance or estate taxes AND low income tax rates or no income tax at all – surprised ?
The IRS data cited in the comment thread is here: https://www.irs.gov/statistics/soi-tax-stats-migration-data
For filers with $200,000 of Adjusted Gross Income, Vermont experienced a net in-migration of 126 filers but a net out-migration of $97.7 million dollars between 2011 and 2016.
For all filers, Vermont experienced a net out-migration of 4,249 filers and $255.2 million dollars in that period.
Thank you Jake Feldman, facts do matter!
Thanks Jake, facts really do matter!
How about caring about the people who are having their Social Security income taxed? Many of my friends plan to leave because there are states that are warm and don’t tax social security.
Meanwhile, having a schedule of gifting to children and charities sounds like a good way to distribute wealth in the community.
Auditor Hoffer,
You keep cherry-picking the $200k bracket because it fits your narrative. We’re not talking about everyone in the $200k bracket, we’re talking about high net-worth individuals who would pass on estates large enough to be subject to the Death Tax. As noted by others, in the time period you mentioned we had net in-migration of tax filers in that income bracket but an OUTFLOW of the total value of income tax receipts in aggregate. One $10-millionaire provides more value to state income tax receipts than nine $1-millionaires.
As an anecdote, my parents make north of $200k but remain solidly middle-class and certainly won’t be leaving me with an inheritance large enough to be subject to any state or federal Death Tax but still count in your cherry-picked figure. (FWIW, my parents have recently shifted their official residence from VT to Mass as the flat income tax rate of 5.05% presents significant savings over Vermont’s outrageous progressive income tax structure….a trend only exacerbated with the Tax Cuts & Jobs Act’s $10k cap to the SALT deduction.)
Lastly, estate taxes are a tremendously unfair and immoral form of taxation. Inheritances represent earned income. Taxes have already been paid on that income (and if they haven’t that’s an audit problem; not a tax code problem). Estate taxes amount to double-taxation on the activity that generated that income.
Mr. Feldman
I always appreciate those (like you) who seek the data so thanks for that.
However, in this case, you provided no context for that $97 million figure. Try this. During that period (2012 – 2016) Vermont’s total aggregate AGI was over 85 billion so the $97 million represents just a bit more than one tenth of one percent. Pretty sure the sky is not falling.
Moreover, you might be surprised to learn that more than half the states in the country lost AGI from domestic migration and that many lost a greater percentage than VT.
Facts matter, but context is im portant too.
Mr. DeFrancis said “my parents have recently shifted their official residence from VT to Mass as the flat income tax rate of 5.05% presents significant savings over Vermont’s outrageous progressive income tax structure.”
Interesting. You are probably unaware that Vermont’s top marginal rate is not what your parents pay. We have a progressive structure so on average the effective rate for those that earn $200,000 to $299,999 is 4.8%. Therefore, it’s likely your parents are paying more in MA than they were in VT.
Aren’t facts fun?
According to the most recent year of Vermont income tax statistics (https://tax.vermont.gov/research-and-reports/statistical-data/income-tax):
The 11,711 Vermont resident filers with AGI over $200,000 had about $5.4 billion dollars in total AGI and paid about $306 million dollars in total income taxes. This translates to an average effective tax rate for that group of about 5.7%.
Had the net out-migration not happened in the five years prior, the base for this filer population would have been $97.7 million dollars bigger in 2017 (this takes some thinking about) which translates to about $5.5M more in income tax revenue to the state at the average effective rate.
Thanks to Doug Hoffer, who obviously gets up earlier than I do, which isn’t hard!
This argument has staying power, but in the end, there are always lots of anecdotes, and NO statistical evidence supporting it. That’s pretty odd, given how often we’ve been told (and for how long) that Vermont’s high taxes are causing substantial out-migration. Where are the supporting statistics? A theory which fails every factual test should be considered false, however plausible anecdotal evidence may make it seem.
The theory is simply wrong. Study after study shows that the top reasons why people move from one state to another are family and jobs. The US Census Bureau tracks this annually and doesn’t even list taxes among the explanations people offer. Remember that Americans are VERY mobile: roughly 10-20% move every year.
As to some of the proposed “fixes” to this non-existent problem, they’re just silly. Raising the bar on the estate tax changes NOTHING when VT has a tax and alternative states don’t. It MIGHT make sense if the alternative states most people choose (FL, esp.) had a LOWER tax (or higher limit). But ANY tax vs zero is going to be “too high.” The “solution” is even less reasonable than the “problem” it purports to solve.
One last note. Kendall at Hanover is right on the other side of the river, and that there aren’t a lot of other similar opportunities in Vermont outside of Chittenden County. Just as I go to Dartmouth-Hitchcock or Boston for certain medical interventions not available in the Brattleboro area, it’s not impossible that I would end up in NH or MA if I needed to go to a retirement facility, since there are none nearby in VT.
Mr. Feldman
The $97.7 million was over five years so (if your figures are correct) the $5.5 million savings would not be realized in one year, but over time. If it was one fifth per year ($1.1m) it would be a rounding error since the total income tax paid in 2017 was $725 million. Again, not as good as gaining $1.1m, but the sky is not falling.
To illustrate my earlier point:
Suppose in 2015 one person with $1 million dollars in AGI migrates out of Vermont.
Suppose in 2016 one person with $2 million dollars in AGI migrates out of Vermont.
In 2017, there would be $3M more of taxable income in the state had these filers not out-migrated. This logic leads to the $5.5 million estimate in my earlier post.
Mr. Feldman
I was with you when you used data. But your hypothetical is one-sided and ignores the possibility that some millionaires would move into Vermont (some do).
People who live in states with less income inequality are healthier — whether they are rich or poor — compared to people of similar income who live in states with greater income inequality. I think we should consider having lower income inequality (which is how I interpret the observation that our Vermont rich people are not as rich as rich people elsewhere) as a plus, not a minus. See Figure 1 in https://ajph.aphapublications.org/doi/pdf/…
Every single person who has the good fortune to weigh this question, does so. The estate tax can be the deciding factor in many cases. The group statistics are not designed to pick up on nuance. The estate tax should mirror the federal tax thresholds. At that level it would reflect goals that many Vermonters share, such as keeping large farms intact. Those are part of estate values, iirc.
Paul Cillo doesn’t buy it. The executive director of the Public Assets Institute in Montpelier said he’s heard this claim for years and has never seen any evidence to back it up
I love the tag line of the public assets institute as being non-partisan. This progressive organization is as non-partisan as Zuckerman and Tim Ashe in a single body.
My wife and I moved from Florida to Vermont last year, six years after I retired. We are, sadly, not rich enough to be at risk from the inheritance tax, but we were well aware that our property taxes and income taxes would be higher here. (Our car and house insurance costs are lower.) We had lots of reasons for the move, but one big one was that we expect the Florida economy to collapse in the next 20 years from the effects of climate change. We have no confidence whatever that Florida state government will effectively address preventing or mitigating the effects of climate change. Also, Florida is not just a low-tax state, it is a low-services state, and that will be more important to us as we get older.
Two issues here, first, every state has a spending problem! Taxes are not the issue it how badly the states manage the tax dollars they get.
Second, Paul Cillo is a fool. Every state that has high taxes is seeing the rich leave. There is nothing free and the state and federal governments need to realize this and better manage the money they steal from us that produce.
So, Scott and Samson both want to cut taxes for the wealthy. Considering that they are both Republicans, is that terribly surprising? This is just more of the “trickle down” horse crap that Republicans have been shoveling for years even though decades of living under trickle down has not produced the promised results.
Given that both Phil Scott is a millionaire and Kaj Sampson isnt exactly poverty stricken, one has to wonder exactly how much self dealing is behind their push to give the wealthy a big tax break.
All that being said, Vermont’s “progressive” tax system is for the birds. How about going back to the drawing board and drafting a tax scheme that is fair for everyone?
It would be so easy to run an experiment over 5 years that would show statistically which strategy works best. We have the data for the gouge strategy for the last 5 years, so why not try the welcoming strategy for 5 years? I want to live in a state that accepts all socio-economic levels instead of pitting one group against the other. We should be asking what type of State we want to be. Our tax policy sends the message that we want to have power over the rich and take them down. Why would they want to stay? Or come in the first place? I’m certain that there are fiscal policies that would send a kinder message but would maintain the standard of fiscally responsible. How come we aren’t, instead, scrutinizing how our tax dollars are spent in the first place instead of assuming we need to gouge the rich to pay for what we are currently spending? And, I’m not rich, so I can’t be superficially labeled as having self-serving motives instead of seeing things in a balanced, rational way.
@pcowanvt – I’m trying to understand your point of view. So, how much benefit have you personally received from trickle down? It seems as if you oppose taxing the wealthy based on their ability to pay. So here’s the thing, in my view: we already don’t tax the income challenged based on their inability to pay and now it seems that you are suggesting that we dont tax the wealthy based on their ability to pay. How exactly do you think that will benefit the middle class? I believe that we’re already taxed at a higher percentage of our income than any other group when you factor all the write offs that the wealthy have traditionally been able to take advantage of . So if we’re not taxing the poor and we’re not taxing the rich, how exactly is that going to help those of us in the middle class? Do you honestly think that the wealthy are going to dump the amount they aren’t being taxed into the local economy and that’s going to “trickle down”? Further, you seem to be suggesting that we cut spending. I’m on board with that but exactly what programs do you suggest cutting? Should we become a state like Alabama or Mississippi and get rid of most services for the sake of much lower taxes? Do we become a state like Kansas and institute massive tax cuts to the detriment of all state services including education? As I said previously, I think our “progressive” tax system is for the birds and am on board with creating a new tax system that more fairly taxes people but I’m really not sure what that would look like.
I spent 35 years operating a moving company in Chittenden County. The high tax rates in the State of Vermont contributed to our revenues by motivating people to seek less taxing venues. I can assure you high tax rates DO motivate people to move out of the State. There were some years I was tempted to send flowers to the legislators expressing my gratitude.
My comments may be anecdotal but my experience is not. Pat Robins speaks the truth – uncomfortable as it is.
This report cites an 8 year old study, using 30 year old data in some cases, to address a current issue. How about this 2018 report from the CATO Institute.
“The raw data suggest that taxes do influence migration. Of the 25 highest-tax states, 24 of them had net out-migration in 2016. Of the 25 lowest-tax states, 17 had net in-migration. The largest out-migration is from high-tax New York, whereas the largest in-migration is to low-tax Florida.”
https://www.cato.org/publications/tax-budg…
And the IRS data on total Vermont migration indicates that in 2015-2016 there were 9505 inflow tax returns and 10,520 out flow tax returns. The net outflow was 1015 for just one year. After all, high taxes affect everyone.
https://www.irs.gov/statistics/soi-tax-sta…
PC Cowan wants an experiment, ignoring the fact that we’ve had one going on for decades. It has completely disproved the hypothesis that high tax rates cause high-income and high-asset folks to leave the state. So has virtually every study ever done on the subject elsewhere. From a scientific point of view, whether or not we have a correct theory, it’s pretty safe to say that we “know” that this hypothesis is false.
In the case of income taxes, we have also experimented with higher and lower marginal tax rates. For example, current rates are LOWER than they were in 2009. If you can show that there has been a difference in the inflows and outflows of these individuals, please do so. Otherwise, we’ve done the experiment with income taxes.
The other problem with your proposal is that lowering or eliminating these taxes would leave a gaping hole in VT’s budget. Assuming you’re not planning to provide the funds yourself, please tell us exactly what spending you would cut or what other tax you would raise to make up for the lost tax revenues. If you want legislators to take your proposal seriously, then make a serious proposal.
Finally, in a world where income inequality has steadily increased (both before AND after taxes), your proposal would exacerbate the problem.
If you don’t think it IS a problem, consider this. It’s well understood that as incomes rise, spending decreases as a percentage of income. “Rich” people spend proportionately less and save proportionately more as their incomes rise. But US GDP (and I assume VT’s as well) depends heavily on consumer spending. Lower taxes for higher income people results in LESS economic growth, which is precisely what we’ve see in the US since WWII.
pcowanvt said, “Our tax policy sends the message that we want to have power over the rich and take them down.”
That is simply not true. The top 1% pay just about the same percent of income for all state & local taxes as the middle class. You’ve been fed a bunch of baloney.
https://itep.org/whopays/vermont/
According to ITEP, if taxpayers in the top 1 percent are left with a higher percentage of their pre-tax income to spend on their day-to-day living and to save for the future than low- and middle-income taxpayers, the tax system is regressive and receives a negative tax inequality index score.
Vermont ranks 49th. In other words, high wage earners pay a higher portion of their income in Vermont than in every other state except California and the District of Columbia.
While many of you think this is a good idea (its less ‘regressive’), its clear that Vermont’s tax structure is a disincentive for the high income demographic to live here. As Winston Churchill said, “The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”
But in Vermont, at least, its equal.
Jay Eshelman concludes his otherwise accurate summary of ITEP’s report by saying “But in Vermont, at least, its equal.”
How is it “equal” if, in Mr. Eshelman’s words, “taxpayers in the top 1 percent are left with a higher percentage of their pre-tax income to spend … than low- and middle-income taxpayers?”
Let’s not get hung up descriptive terms like “regressive” or “progressive.” The nub of the issue is this: Should high-income Vermonters pay the same proportion of their income in taxes as everyone else, less (as currently) or more? Call any of these systems whatever you want. Which one should we be aiming for as a polity?
Here’s my 2 cents. The current system cannot be justified by ANY approach to political ethics or morality that I’ve ever heard of. For precisely this reason, there is tremendous opposition to the tax burden from Vermont’s middle classes, who not coincidentally, pay the highest burden.
One definition of fairness — in my estimation, a pretty minimal one — is that everyone pays the same, regardless of their needs and resources. But as noted, we are NOT achieving even this minimal standard, despite an income tax structure which requires those with higher incomes to pay higher marginal tax rates.
But again in my view, such a minimal system is grossly unfair in a society in which income inequality is as rampant as ours. It’s undemocratic, discourages many kinds of hard work, and in our economy which is highly dependent on consumer spending, retards economic growth.
Consequently, I favor an overall system in which as incomes and assets rise, the rate of taxation does also.
Mr. Greenberg: To answer your question, you’ll have to ask ITEP (Institution on Taxation and Economic Policy). It’s their statement. Not mine.
Of course, then you’ll have to reconcile the ITEP report with Auditor Hoffer’s remark that “The top 1% pay just about the same percent of income for all state & local taxes as the middle class.”
On the other hand, we could go with your ‘opinion’ of what is ‘grossly unfair’ ….or not. But if you “…favor an overall system in which as incomes and assets rise, the rate of taxation does also…”, no worries. Thats the system we have now.
So, what’s your point?
The latest ITEP report (6th edition) shows that Vermont is getting closer to a progressive system than it was in all ITEPs previous reports. https://itep.org/wp-content/uploads/whopay…, p. 123 of pdf. And I confess I was relying on the older figures (less progressive by far) in making my remarks. See, e.g the previous edition: https://itep.org/wp-content/uploads/whopay…, p. 124.
To avoid confusion, I will cite the actual figures given by ITEP (6th ed.), which are categorized as follows: the lowest 4 quintiles of income are given as quintiles, the top quintile is divided into the 15% of incomes (between 80 and 95%), the next 4% and the top 1%. The percentages of family income that each of these groups pays in ALL Vermont taxes (state and local sales & excise, property taxes, and income taxes) are 8.7%, 9%, 10.1%, 9.1%, 10.4%, 10%, and 10.4% respectively..
Compared to other states, these figures are more equal than most, but more equal is not equal any more than 8.7 = 10.4.
As to progressivity, the new figures do show that the tax structure is now more (and largely) progressive, but not entirely so. In particular, those with incomes of $39,100 to $59,500 pay a LARGER percentage of their incomes in taxes than those with incomes of $55,500 to $94,000 or those with incomes of $196, 000 to $460,100 and only very slightly less than those with incomes of $94,000 to 196,000 and those with incomes greater than $460,100.
Ill leave it to readers to decide whether this is the best, fairest system we Vermonters can devise.
While its better than most, and better than it was, in my view its still not good enough.
Mr. Hofer can speak for himself if he wishes to.
DOUG HOFFER – you cite the ITEP data in a discussion about estate taxes, but it appears the ITEP data does not include estate tax figures in its analysis. Why did you cite it, if that is the case?
Thanks for trying to understand my point of view. The full basis of my thinking is that we always seem to be focusing on the wrong things when discussing fiscal policy. We should be choosing the approach that results in the most prosperity for all citizens. Instead, we seem to want to punish rich people which could result in eroding the very tax base we talk about cultivating. Why can’t we run experiments to determine where the best balance is? Why not identify key indicators that measure the affect various tax policies have on the state?
After all, I think all parties would agree that transfer of wealth should be about creating the best balance for our state. To just come up with some esoteric concept of fairness without discussing the effect that fairness has on the economic landscape of the state is what gets us in trouble all the time. Act 60 is the perfect example. Because our state has this judgmental view on wealth, it is blinded to data that has the answer. If the data doesn’t support the fiscal policy chosen, it is either ignored, or cherry picked. That makes the lawmakers feel good, and maybe even the citizenry because it SOUNDS good, but the facts on the ground aren’t good. We need to be free to analyze the data without being judged. Then a proper fiscal policy can be crafted. If the answer is a highly progressive system, then I would support it. But, I think logic dictates that when aggressively taxed, folks move. It’s hard to believe that this isn’t the case. So, I don’t really trust our current group of lawmakers to handle data responsibly if it doesn’t support their agenda.