State's economic outlook desolate
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By Bruce Edwards STAFF WRITER - Published: July 9, 2009
Vermont's economic outlook looks bleak, ranking 49 out of the 50 states, according to a study released Wednesday by the American Legislative Exchange Council.
The second edition of "Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index" concluded that, "high personal income taxes, high property taxes, along with some of the highest labor costs in America all hurt Vermont's economic outlook."
The study gives the state good grades for its relatively low sales tax burden and quality legal system.
While Vermont's economic outlook ranked poorly, the two-part report placed Vermont 16 out of the 50 states in terms of economic performance based on census data over a 10-year period: per capita income growth, nonfarm job growth and domestic migration (more people are relocating to the state than leaving).
Two of Vermont's neighbors had a better economic outlook with New Hampshire placing 37 and Massachusetts 26. New York was 50.
Last year, the organization ranked Vermont last among the 50 states.
The American Legislative Exchange Council refers to itself as a nonpartisan individual membership organization of state legislators who favor federalism and conservative public policy solutions.
The 2009 report is critical of federal stimulus dollars that "may simply encourage out-of-control state spending" instead of requiring states to cut spending to ensure financial stability.
"States were quick to increase spending and add programs during the good times," Sen. Kevin Mullin, R-Rutland and ALEC's state chairman, said in a statement. "We need to make tough choices to live within our means and prioritize our budget."
David Mace, a spokesman for the state Agency of Commerce and Community Development, said the state's poor ranking is disappointing but not surprising.
"I think Governor Douglas and his administration have been saying for some time now that issues like taxes and the high cost of unemployment insurance, housing and health care … that these make us less competitive," Mace said.
However, Doug Hoffer, a Burlington-based research and policy analysis, took issue with the ALEC report. In an e-mail, Hoffer said the report's methodology had "very serious flaws."
Although Vermont fares well when it comes to economic performance, Jonathan Williams, one of the co-authors of the report, said that ranking likely won't hold up in the future.
"On one hand the story is Vermont has been doing better than the national average in economic performance but we warn legislators that if current policy remains intact we forecast that things could get worse in Vermont before they get better," said Williams, director of the Tax and Fiscal Policy Task Force for ALEC.
The report was also co-authored by economist Arthur Laffer and Steve Moore, senior economics writer at The Wall Street Journal.
The report found that states with a high and increasing tax burden are more likely to suffer economic decline while states with lower and falling tax burdens are more likely to enjoy robust economic growth.
The report's top five states: Utah, Colorado, Arizona, Virginia and South Dakota. The bottom five states: New Jersey, Maine, Rhode Island, Vermont and New York.
bruce.edwards@rutland herald.com
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