New Hampshire, Vermont, Tax Revenue, Tax Capacity, and Values

taxesArt Woolf, an Associate Professor of Economics at the University of Vermont, has an interesting piece in the Burlington Free Press. Interesting, because it hints at a problem in a context most progressives typically ignore.

First, as part of this research professor Woolf reports that as a percentage of total income earned New Hampshire is still one of the lowest taxed states in the Nation. The national average is 10.59 percent, and New Hampshire’s rate is only 8.86 percent. (Vermont’s is over 12%.)

New Hampshire’s rank is important because the article asks questions about spending priorities, values, efficient delivery of services, and just how much you can expect to take and for what.

Does Vermont have the financial capacity to raise additional revenues to clean up Lake Champlain, provide more resources for child welfare, expand health insurance access, promote Vermont’s agricultural economy and tourism, provide affordable housing to low-income Vermonters, expand pre-K educational opportunities, subsidize electric cars, windmills, and solar arrays? The list of unmet social needs is endless but our resources to meet those needs are not.

Our ability to raise new revenues depends on our values, but also on how much tax capacity Vermont has.

It actually relies on the capacity of those in power to place a higher value on the state’s right to make decisions about how to spend “property” than the persons from whom they take it.

And most advocates looking to “expand pre-K educational opportunities, subsidize electric cars, windmills, and solar arrays” at public expense are less interested in the question of taxpayer tolerance for being plundered and more concerned with how best to couch their innate desire to rob them to pay for progressive flights of fancy.

So, Kudos to Professor Woolf for taking a moment during such a flight of fancy to do something unheard of; look out the window and see a forest for the trees.

By his calculations Vermont taxes earnings (as a percentage of total income earned) at 12.29 percent, well above the national average. With the Granite State taking about 3.5% less per individual, increasing the disparity could incentivize “businesses and people [to] ultimately move to other states if Vermont is out of line with our competitors.”

How much is too much becomes a problem when the people you are plundering are still free to walk off your plantation. Asking if you can raise more to meet the cost of your ‘values’ comes with a price when states operate like free markets, something Democrats undoubtedly hate.

The Democrat Socialists would like very much to tax the crap out of everyone such that leaving one Liberal ghetto for another would provide no relief, but that is not currently how the landscape is painted. People or business owners who think they’ve let enough ‘blood’ or who disagree with the priorities can pull up stakes and move away, leaving behind a growing revenue problem created by progressive values.

Woolf recognizes this as critical to Vermont’s current circumstances (emphasis mine).

At 8.68 percent of income, our neighbor New Hampshire has one of the lowest tax burdens in the nation.  It does that by being one of four states with no general sales tax.  It’s also one of nine states with essentially no personal income tax and is one of only two states (the other is Alaska) with no sales or income tax.  If we wanted to tax at New Hampshire’s level, Vermont would have to reduce our total taxes by nearly $1.1 billion. 

I don’t think that’s likely to happen in the near future, or at any time.  But it does tell us that governments can provide services to its people with lower taxes than Vermont’s.  New Hampshire’s low taxes don’t hurt its economy or its people.  It has aone of the highest household income levels in the nation, $13,000 higher than Vermont’s, and its poverty rate is virtually identical to Vermont.

New Hampshire Republicans will see this (rightly) as a reason to encourage more of the same. Lower taxation, leaner government, and a culture that puts more value on individual choice than political plans that require more economic plunder. It is a reason to make New Hampshire more economically inviting.

New Hampshire Democrats could just move to Vermont but instead, they will see this an invitation to try and close that gap. If America isn’t exceptional why should New Hampshire be any different? Let’s go get that 2-4% so Vermont won’t feel so stymied.

If New Hampshire were more like Vermont (except for constitutional carry, which they’ll try to undo the first chance they get) State government would have millions more of other people’s dollars every year with which to finance their priorities, which are little different from the ones that have spent Vermont into a corner.

At Vermont’s current level of taxes, there’s not much room for new taxes to solve new problems, much less the problems we already know about.

That’s the true promise of the progressive worldview because its highest value is to feed the bureaucracy needed to sustain it at the expense of all others. And like all things that are overweight, it becomes slower and less able to value much of anything except consuming resources. Professor Woolf does not endeavor to suggest this as an issue or consider in depth what Vermont ought to do, but at least he dares to point to the problem.

New Hampshire can learn a lot from Vermont when it comes to spending other people’s money. Look at what they have done and continue to do something different.