We hear politicians spout it all the time when they are raising our taxes: “We’re just making them (of course not you) pay their fair share.” But what exactly is one’s “fair share,” and at what point can one be considered to be paying MORE than his or her “fair share”?
It seems like a good and important question to ask in this last post of 2023 and in anticipation of Vermont’s Democrat Supermajority returning to Montpelier next week for the start of the 2024 legislative session, looking, as they always do, to redefine this undefined term upward.
I have asked this question about what exactly a fair share is in the past. (Really fun to ask politicians on the campaign trail. Try it! The resulting squirming is impressive.) I get lots of answers, but rarely, if ever, a straight one, such as 20% of one’s income is enough. Or, as Bernie and his fellow travelers might say if they were being honest, “Everything you earn belongs to us, your government overlords. Just shut up and be happy we let you keep any of it.” What do you think?
Anyway, we can expect a lot of “fair share” rhetoric buzzing through the airwaves and social media in 2024 as our so-called representatives find new and creative ways to screw hard-working Vermonters out of their wages to pay for more pet projects that provide little real value or benefit to society. See, last sessions’ “Clean Heat” carbon tax forcing you to pay “your fair share” through higher heating bills to not have any impact on climate change, for example. Or the 20 percent DMV fee increases the department said it didn’t need or want, but lawmakers implemented anyway just, I guess, to be “fair.” And, of course, the anticipated 18.5 percent increase in property taxes, which is apparently the new “fair” price to pay for increasingly poor public school performance catering to fewer overall students
Another suggestion coming back next year is a 3 percent income tax surcharge on Vermonters earning over $500,000 a year. That would make the state marginal income tax rate on these folks 11.75 percent – the highest in the nation bar California (13.3 percent). And, just a reminder, our neighbor New Hampshire has no earned income tax at all and is phasing out its tax on dividend and interest income within the next year or so. (Please finish this article before you start scrolling through Zillow.)
This additional 3 percent surcharge would say its advocates, raise roughly $100 million per year from not very many people. According to an analysis done by former state economist Art Woolf back in 2018, only 1,658 Vermonters earned over $500,000, and just 488 earned more than $1 million. Still, this tiny group of about half a percent of Vermont taxpayers accounts for 20 percent of all income taxes paid. Is that fair?
Yes, many will shout! I don’t earn $500,000 a year, so who cares? “Don’t tax you, don’t tax me, tax that rich guy behind the tree,” as the ditty goes. But here’s the thing…
As Woolf points out,
For most Vermonters who earn [$500,000 or more], having a high income is a one-time event. The Vermont Tax Department looked into this a few years ago and found that half of all the taxpayers who earned $500,000 or more experienced that level of income only once over a 10-year period…. Only 3 percent [of that half of one percent of all taxpayers] earned over $500,000 dollars in every one of the 10 years…. The basic conclusion: Very high-income Vermonters are rich because of a one-time event.”
Such as an otherwise non-wealthy Vermonter selling a house or a business. So, what this 3 percent income tax surcharge really is in practice, with very few exceptions, is not a screw the rich out of their ill-gotten gains play. It’s just the government greedily taking another chunk (on top of the property transfer tax) out of what is, for most of us, the largest investment we will make in our lifetimes, our house, or a bite out of Mom & Pop’s sale of their local business after a lifetime of work. These are often cases in which hardworking people have invested years of equity into these assets in order to fund their retirement. And our government wants a bigger piece of that. And no, it’s not “fair.”
The lesson here is to be careful when progressives try to win your support for some program by telling you they’re going to raise taxes on someone else to pay for it. In the end, it’s just propaganda, and it’s your wallet they end up looting because, as Willie Sutton might observe, “That’s where the money is.”
One of the questions Campaign for Vermont asked in their recent poll was Do you “Support/Oppose: Creating a Vermont Taxpayer’s Bill of Rights, which would limit state spending growth to the rate of inflation and population growth; and would require any tax revenue collected in excess of that amount to be refunded to taxpayers. It would also require voter approval for any tax increases above and beyond this formula.” Gratifyingly, 67 percent of Vermonters supported the idea. Only 16 percent opposed it outright. This tells me that a solid majority of Vermonters think we’re already paying more than our fair share, and it’s time to cut off the spigot.
