MONTPELIER — A legislative report has highlighted the net-loss of Vermonters moving out-of-state that has brought calls for policies that support low- and middle-income taxpayers.
Legislators have expressed concern that lower-income Vermonters are leaving the state to find higher wages, lower taxes, a lower cost of living and cheaper housing.
Administration officials said they have a number of initiatives to address issues around people leaving the state, and to make Vermont more affordable.
It follows the release of the Joint Fiscal Office report, “Taxpayer Migration by Age and Income: Evidence from the IRS.” The report used Internal Revenue Service data to highlight the types of taxpayers that moved to and from Vermont between 2011 and 2016.
“Overall, on net, Vermont lost 4,167 taxpayers to migration over the five-year period,” the report stated. “On net, Vermont lost significant numbers of taxpayers reporting lower- and middle-incomes over the five-year period.
“Over the 2011 to 2016 period, Vermont lost taxpayers to migration: 43,174 taxpayers migrated into Vermont while 47,881 taxpayers migrated out, for the total net out-migration over the period of 4,167 taxpayers,” the report added.
The report noted that most of the migration, 4,099 taxpayers, were people who earned under $100,000 during the study period and was stronger among older Vermonters aged 45 to 64 with incomes between $25,000 and $75,000.
On the other hand, Vermont also had a net increase in 126 high-income earners with a reported income of $200,000 or above in the year of their move over the five-year period, the report stated.
In general, the report also noted Vermont lost the most people to the Southeast and the West, while it gained the most people from New York and other states in the Northeast.
The data are based on IRS 1040 tax returns for all 50 states which show the adjusted gross income (AGI) for two years, where the AGI in one year has a different address in the second year, indicating the taxpayer had moved.
The report said it was difficult to make definitive conclusions about the total amount of income that flowed in or out of Vermont over the five-year period, but it was a net loss.
“The dataset indicates that taxpayers with over $2.46 billion in net income in the home state (Year 1) migrated into Vermont,” the report stated. “At the same time, taxpayers with $2.47 billion in Vermont Year 1 income left the state, but it is not possible to know how much income was made in the new state.”
While the report said it was difficult to estimate the amount of wealth flowing back and forth because of variables in reported income from one year to the next and from state-to-state, a Vermont Tax Department official confirmed there was a net outflow of money.
“In both the IRS data and the in-state, there does appear to be an outflow of money,” said Jake Feldman, a senior fiscal analyst. “Between 2011 and 2016, the amount out is $97.724 million.”
However, Feldman noted that there had also been an increase of more than 7,000 tax filers during the five-year study period, from 310,265 in 2011 to 317,728 in 2017.
Feldman said it also called into question the net-out migration of taxpayers reported in the JFO study.
“The IRS data showed 4,167 taxpayers migrating out, but our own Tax Department records don’t show that,” Feldman said. “In fact, if you look at our annual statistics, you’ll see an increase in the filer count, so I don’t think that statistic is actually reliable at all; I think it’s erroneous.”
Neither the JFO report nor Feldman could explain why people left the state, based on the data available.
Jack Hoffman, a senior policy analyst with the Public Assets Institute, said the institute’s own study confirmed the findings of the JFO report.
But Hoffman noted that the loss of 4,167 taxpayers over five years out of a total of 265 taxpayers in the IRS reports was less than 0.4%.
“The fact is, the vast majority of Vermonters stay put,” Hoffman said, but added that the aging of the state’s population was a problem that needed to be addressed.
Hoffman also noted that the JFO report also refuted a “tired claim” that wealthy Vermonters were fleeing the state.
Sen. Anthony Pollina, D-P-Washington, and Sen. Michael Sirotkin, D-Chittenden, agreed, both saying reports that wealthy Vermonters leaving was “a myth.”
On the contrary, they said the JFO report confirmed that there was a net increase of wealthier Vermonters coming to Vermont, while low- and moderate-income Vermonters were leaving.
“The study doesn’t say why, but we can conclude that lower-income Vermonters are moving in search of higher paying jobs and lower costs of living,” Pollina said.
“I share Senator Pollina’s concern about income inequality — it’s been a big concern of mine for a number of years,” Sirotkin said, adding that it was important to increase the minimum wage and approve a family paid leave bill — two initiatives that stalled in the Legislature last session.
“It shows that there’s an affordability problem in Vermont that these lower-income people are leaving,” Pollina added.
Rebecca Kelley, communications director for Republican Gov. Phil Scott, said the administration had a number of initiatives to address income inequality, out-migration, and, affordability in Vermont — the central tenet of Scott’s election platform.
Kelley said initiatives included reversing trends — out-migration, a shrinking labor force, falling student enrollment and an aging demographic — by offering financial incentives for people to move to Vermont, refusing to sign tax or fee increases, eliminating the tax on social security benefits for low- and moderate-income earners and a tax reform package to prevent a tax increase on working families.
Other steps by Scott to improve the economy included a $37 million housing bond to build 500 new housing units in the state, increased tax credits for first-time homebuyers, and proposed additional tax credit and permit reforms to expand the availability of affordable rental and housing stock which included the roll-back of the land gains tax this year, Kelley said.
Scott also increased investment in the Child Care Financial assistance program by 30% and the administration continues to expand its health care all-payer model of payment reform that is based on improved outcomes versus fee-for-service to keep Vermonters healthier and reduce costs, Kelley added.
“As (Gov. Scott) has outlined, attracting and retaining more working-age people and families to Vermont is key to achieving his priorities to grow the economy, make Vermont more affordable and protect the most vulnerable,” Kelley said in an email. “To do so, he’s focused on leveraging and improving the assets we have (such as strong health care and education systems, safe communities and our outdoor recreation), making Vermont more affordable, and by ensuring we continue to have — and add more — good jobs in Vermont.”