Wealth Mythology

Governor Shumlin appears to be crafting a legacy like most of his Republican and Democratic predecessors that is at once socially progressive and fiscally responsible. But his credibility falters though when he turns to the old canards of fleeing wealth, tax burden and “job creators.”

Vermont does bear a heavier than average tax burden. According to the 2010 report from the non-partisan Tax Foundation, Vermont now ranks 13th in total state & local tax burden. With 620,000 people, a little over half of whom must file an income tax return, a challenging geographic transportation and information infrastructure, cold winters that require heating energy, and a commitment to educational quality, we are never going to be competitive by that measure alone. But we do have lower taxes than other economically healthy states including, California, Connecticut, Illinois, New York, New Jersey, Maine, and Massachusetts among others. Furthermore, most research shows that tax burden doesn’t seem to have much of an impact on state economies. Vermont has the third lowest unemployment rate in the country and the lowest in New England. It’s more important social rankings such as wellness, educational quality and graduation rates, health insurance coverage, environmental quality, and low crime rate are among the best.

The durable myth that the rich spend their wealth creating jobs has long since been debunked. They are valuable because they are people with ideas, skills, generosity and resources and have chosen to live among us. Many, however, including the last presidential candidate, preserve and grow their wealth in offshore tax havens.

According to a report in Accounting Today, offshoring by the wealthy costs the average tax filer about a thousand dollars a year in offsetting taxes. States lose 40 billion dollars a year in tax revenue. Bailed out by taxpayers, Citigroup admits 42 billion dollars in offshore accounts, costing eleven billion in lost taxes yearly. Apple is the latest mega-business to come under tax scrutiny, attributing 30 billion dollars in income to an affiliate in Ireland where it has no employees. International estimates are that between 21 and 32 trillion dollars are sequestered in offshore accounts, avoiding 156 billion dollars in tax revenue. Oxfam claims that simply collecting taxes due could end poverty as we know it. Some wealthy people are indeed entrepreneurs and create jobs, but far more are simply adept at sheltering their assets from taxation.

The Governor could better focus new attention on our economic development efforts with an eye towards the full spectrum of attributes that make Vermont a desirable or undesirable place to do business. Taxes and regulation are but two criteria. Do we really want to emulate states with the lowest taxes and most lenient regulations?

With resourceful partners, I started three businesses in Vermont and got help from VEDA four times when we needed growth capital. We paid taxes and followed regulations. Vermont was good to us.

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