Eric Davis: In Vermont, only the wealthy are seeing incomes grow

One of Gov. Shumlin’s talking points in his speeches around the state is that “Vermont’s economy is on the mend.” The governor claims that Vermont has been doing better than most states in recovering from the recession, and that Vermont was the only state in the nation to see actual growth in personal income from 2010 to 2011. While this claim is borne out by the economic data, what the governor does not say is that the income growth in 2011 was concentrated in a small proportion of Vermont households.
Tom Kavet, the Legislature’s economic consultant, used data from the Vermont Department of Taxes to analyze the growth in adjusted gross income from 2010 to 2011. The average income growth for all Vermont residents in 2011 was 5.1 percent. However, the only income classes to see their income grow more than the statewide average were those households with adjusted gross incomes of $125,000 or more.
The great majority of Vermont households — those with incomes close to the statewide median of $53,400 — saw their incomes remain stagnant in 2011. For example, households with incomes of $45,000 to $50,000 saw their incomes go up only 1.7 percent, while households in the $50,000 to $75,000 range actually saw a slight decline in their incomes, by about one-quarter of one percent. At the other end of the scale, households with incomes between $125,000 and $500,000 saw increases in the 7 to 9 percent range, while the small number of households with incomes over $500,000 saw double-digit increases.
U.S. Census data for the period ending in 2011 show that only 17,900 of Vermont’s 256,700 households had incomes of $150,000 or more. In other words, the income growth that the governor touts in his speeches was concentrated in about 7 percent of Vermont’s households. For the great majority of Vermonters, income growth in 2011 did not keep pace with increases in the cost of gasoline, heating oil, food, property taxes, and other expenses.
The choices Shumlin made, and did not make, in his 2013 budget proposals are puzzling in light of this data on income stagnation for lower- and middle-income Vermonters. The governor is proposing increases in the gasoline tax, reductions in benefits for recipients of the Reach Up and Earned Income Tax Credit programs, and increases in premiums and out-of-pocket costs for Vermonters who will be moved from Catamount Health into the new health benefit exchanges starting in January. These proposals would have their most substantial impact on those households with annual incomes between $25,000 and $50,000, a group which, according to the census data, encompasses 25 percent of all Vermont households.
Shumlin has not proposed any increase in income taxes for upper-income Vermont households, and has indicated he will actively oppose such an increase if it comes to his desk from the Legislature. This is in contrast to the approach taken by his Democratic colleague Gov. Deval Patrick of Massachusetts, another state where, like Vermont, income growth has been concentrated at the upper end of the scale.
Patrick has proposed a package of increases in the income tax and reductions in the sales tax. Patrick wants those residents of Massachusetts whose incomes have grown the most since the end of the recession to pay somewhat more in order to provide the state resources to invest in education and transportation programs. At the same time, he wants to reduce the sales tax to increase the purchasing power of lower- and middle-income households who spend nearly all of what they earn.
Eric L. Davis is professor emeritus of political science at Middlebury College.

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