The Friends of VEPC Strike Back

A remarkable opinion piece appeared on June 29 in the Rutland Herald. Entitled "Arrogance of attack on job creators", it is an outspoken attack on the critics of the programs of the Vermont Economic Progress Council (VEPC). VEPC is a nine member board appointed by the Governor which in the past two years has handed out over $66 million in "economic advancement tax incentives" to businesses whose expansion plans win the approval of the board.

VEPC has long been the target of criticism from two opposing quarters. To friends of a free market, the scheme is the worst sort of crony capitalism: a governmental slush fund handing out valuable tax credits to favored businesses which are willing to meet the government's demands. To the progressives on the Left, VEPC is a costly and inefficient corporate welfare scheme which pays those same businesses to do what they would be doing anyway, or ought to be doing anyway, and ought to be forced to do anyway.

Now comes to VEPC's defense William Schubart, CEO of South Burlington-based Resolutions Inc. Schubart enthusiastically supports the VEPC program as the preferred way of expanding Vermont's economy. He is scornful of VEPC's left wing critics, namely Auditor Edward Flanagan and Progressive gubernatorial candidate Anthony Pollina. These critics, says Schubart, don't realize that tax subsidies awarded to selected businesses create more and better jobs for working Vermonters. "It seems," laments Schubart, "that any effort to create, diversify or enhance job availability to working Vermonters is going to be called 'corporate welfare'". Schubart believes that "self-annointed social architects" like Flanagan and Pollina have no business passing judgment on such a program. The only persons qualified to make that judgment are the "quiet, se Vermonters" for whom VEPC's tax credits (to their employers, not to them ) are a godsend. VEPC's wrong-headed critics, Schubart says, ought to take a hike.

But here's the opposing view: the state's revenue base ought not be the plaything of a handful of business and political insiders, to be distributed like foundation grants to favored corporations whose CEOs are willing to snuggle up to the people running the government. We can't build a fair, equal-opportunity economy when government leaders hand out benefits to supplicants who are eager to negotiate with the government to increase their profits.

The ingredients of sound market-oriented economic growth are well-understood: low and stable taxation, strict but swift, reasonable, and certain environmental regulation, a minimum of costly and anti-competitive employer mandates, a strong educational system, and a modern transportation and telecommunications infrastructure.

As the National Governors Association declared back in 1993, "the public and private sectors should undertake cooperative efforts that result in improvements to the general economic climate rather than focus on subsidies for individual projects or companies." Ironically, Gov. Howard Dean, prime author of most of these schemes for making businesses come to him for valuable tax benefits, was at the time vice chair of the NGA.

Schubart's attack on VEPC's critics illustrates a major division in Vermont politics. It's not a division between Left and Right. It's a division between an elitist group of insiders and everybody else. The former group certainly includes Gov. Howard Dean and certainly many members of the prestigious Vermont Business Roundtable.

The latter populist group is composed of everyone from Sanderistas to Libertarians. This group disagrees violently among themselves. The Flanagan-Pollina-Sanders progressives want a powerful state to tightly regulate all economic activity and enforce wealth redistribution and egalitarianism. The libertarian-Ethan Allen Institute-type people want a free society, with secure private property, limited government, low taxes, competitive free enterprise, and unsubsidized economic opportunity for all. They (we) believe that the progressive program would turn Vermont into Cuba, and the elitist program will turn it into Guatemala, hopefully without the gunfire.

Despite these polar-opposite visions, all of the populists, libertarians and socialists alike, agree that VEPC's corporate welfare handouts create a corrupt hybrid: tax credit socialism for a rich and influential few, and a disadvantaged capitalism for everybody else. When a William Schubart, the chair of the Vermont Business Roundtable and the recent recipient of $1.3 million in VEPC small business investment tax credits, tells them to sit down and shut up, they are not likely to take it gracefully.

John McClaughry is President of the Ethan Allen Institute
(www.ethanallen.org.)

July 2000