Over the course of the last few years, Vermont has done a relatively decent job adjusting to the economic downturn of the “great recession.” Indeed, we have shown ourselves to be adept at austerity. Now, the question is, can Vermont adapt in ways that foster economic prosperity?
Toward that end, what role should the state play in economic development within Vermont? The federal government is intimately engaged in economic intervention — and we have come to expect and even anticipate those moves. But how can a small state like Vermont make meaningful policies that actually change economic directions and outcomes? Should we even try?
The national economic recovery is gaining pace, though it remains tentative and a bit fragile. Vermont has a low nominal unemployment rate, but labor economists acknowledge that those numbers discount the large number of unemployed Vermonters who have become discouraged and have dropped out of the labor market. In fact, there are 3,550 fewer Vermonters working now than there were in December 2012. Further, recent Vermont Department of Labor projections show that the majority of job openings in Vermont in the coming years will be for low-wage, service positions — most of which will not pay a “living wage.” Real median income (adjusted for inflation) in Vermont has yet to recover from the recession. We fear that Vermont’s economy is resetting at a lower level.
If you believe all is well with the Vermont economy, you may favor a laissez-faire approach. But, the state doesn’t just leave the economy on its own. Tax and spending policies influence behavior, sometimes on purpose, sometimes inadvertently. Raising taxes on tobacco or sugar-sweetened drinks is meant to curb consumption. Providing a tax deduction for home mortgage interest and property taxes encourages long-term home ownership. Taxing software served from the “cloud” signals an unfavorable treatment of high-technology business and its use in Vermont.
For our part, we have both long advocated for a long-term comprehensive economic development strategy that would spur growth in the private sector in Vermont. Yet, as other states give away everything but the kitchen sink in efforts to attract private enterprise, we must attract investment in much more creative and strategic ways.
We have been working on legislation that does just this. Our proposal is neither a tax giveaway, nor a costly state program. It is, instead, a carefully designed suite of strategic initiatives designed to both protect and grow our state’s legacy industries like manufacturing, agriculture and our working lands; and to encourage and reward the investment in, and development of, new economy and knowledge-based businesses.
Among other things, the legislation includes the following:
1.      An Entrepreneurial Lending Program for our state’s start-ups and producers;
2.      The creation of a One-Stop Shop for Vermont businesses;
3.      An expansion of the Downtown Tax Credit program for private owners who make their buildings “tech ready” to ensure start-ups and hi-tech companies are able to locate in our downtowns;
4.      The creation of a “Domestic Export” program to help our state’s producers gain access to the extensive regional and domestic market;
5.      A study and report on how best to make electricity costs for our manufacturers more competitive regionally and domestically; and
6.      The elimination of the sales and use tax being imposed on services delivered through the “cloud.”
While this legislation isn’t the panacea of an entire economic development strategy, it is a way to ensure that Vermont’s traditional industries so important to our culture (agriculture, manufacturing, forest products) grow and remain strong. And, it is a way to ensure that Vermont becomes a preferred domicile for technology start-ups, and other new economy businesses.
In the end, it is a way to move from austerity to prosperity in Vermont.