MONTPELIER — Vermont’s rosy revenue projections for the next two years are undercut by growing income inequality for many of the state’s workers, one Washington County lawmaker says.
According to estimates prepared by economists for the state Emergency Board and Joint Fiscal Office last week, state tax revenues for the 2019 fiscal year, which ended July 1, were about $50 million higher than forecast in January. On the recommendation of the economists, the Emergency Board raised revenue projections for fiscal year 2020 by $20.3 million and in fiscal year 2021 by $26.4 million.
The July 2019 Economic Review and Revenue Forecast Update was put together by Kavet, Rockler & Associates, LLC, of Williamstown.
The report attributed most of the rise in tax revenues to a $50 million increase in personal income, likely due to income growth for people in the state’s highest tax brackets. There were also increases in capital gains and real estate transactions. Corporate taxes rose more than $11 million, mainly due to companies transferring assets back to the United States at a lower tax rate and a tax paid being shared with the state.
But Sen. Anthony Pollina, P/D-Washington, said the optimistic outlook for the next two years belied a sobering issue.
“Vermont’s July revenue forecast found our tax revenues exceeded expectations, which is good for our state budget,” Pollina said. “But it also included something that got less attention, although probably more important to most of us — it confirmed our growing income inequality, bad news for Vermont and the many families whose income is dropping.”
Pollina said adjusted gross income of the wealthiest Vermonters making $1 million or more went up 41% between 2016 and 2017, according to the fiscal projection report. Those earning $50,000 to $60,000 saw a slight increase of 2.5%. Those making $35,000 to $40,000 saw an increase of less than 1%, while those making $35,000 or less saw incomes go down.
Pollina said the income differences were even greater over the last few years. From 2010 to 2017, the wealthiest Vermonters saw their incomes more than double, increasing 105%, the report stated. Those earning $50,000 to $60,000 saw increases of 7.3%. Those earning less saw smaller increases and again, many saw their incomes go down.
Pollina said it was clear that most of the benefits of the Trump administration’s tax cuts would go to wealthy Americans, furthering the income inequality gap.
“I brought that up when we were meeting with the economists and I said, ‘What about these Trump tax credits,’ and they said, ‘Well, it really went to the highest earners,’” Pollina said. “We’ve heard that on the federal level as well — we’ve heard the presidential candidates and others debating that and how most of the new wealth continues to go to the wealthiest and those tax cuts most benefited the wealthiest.”
Pollina said the same was true in Vermont.
“This is why people can’t make ends meet,” Pollina said. “We have to identify income inequality as a real issue and try to find ways to reverse it.
“One of the things that encourages inequality — because I’ve looked at this over a number of years — is that tax policy does encourage inequality because it tends to benefit wealthier people rather than lower-income people (with) the tax reforms that we’ve had.
“The fact is that most new income keeps going into the pockets of the wealthiest Vermonters,” Pollina said. “And, while the state budget is balanced and unemployment is low, we are stuck in a pattern of low-paying jobs and growing inequality.”
Pollina said the trend would continue to undermine the state’s economic future and pointed to the need for better paying jobs, higher wages, education tax reform, tuition-free college and other policies to benefit middle-class and lower-income Vermonters.
Pollina said the state economic forecast sent “a clear message” to those worried about the economy and the affordability of Vermont.
“It’s good to balance the state budget, but we must do more to help Vermont families balance their household budgets,” he said.