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December 7, 2006
New EAI report points to Vermont heading "Off the Rails"
"Vermont’s population is aging. In the future there will be many more dependents and fewer wealth-producing workers. These workers will not be able to generate the tax revenue needed to pay Vermont’s projected expenditures for public K-12 education and human services. Increasing broad based tax rates is far more likely to cripple the state’s economy than to produce the needed revenues."
That is the capsule summary of an important new report from the Ethan Allen Institute, entitled Off the Rails: Changing Demographics, Changing Economics, Accumulating Obligations. How Will Vermont Cope with a Challenging Future?
Based on an academic paper prepared by Dr. Arthur Woolf, Associate Professor of Economics at UVM, the Report explores the coming demographic changes over the period 2006-2030. It then examines the trends in school enrollments, education spending and human service spending, and briefly discusses five policies that might be able to cope with the coming challenges.
The Report concludes:
- "By 2030, even if Vermonters are willing to devote an all time high of 18% of their adjusted gross incomes to state and local taxes, more than two thirds of all tax dollars collected will be needed just to pay for public education."
- "Almost all of the remaining tax dollars will be required to fund human services programs. And that assumes there will be no new spending programs, like universal preschools or universal taxpayer-financed health care."
- "Increasing tax rates in an attempt to increase government revenues is not a viable option. That would propel Vermont from fifth place to first place in state and local tax burden. Such a tax burden would doom the state’s efforts to stimulate wealth producing economic growth."
The Report favors changing the state’s tax and regulatory policies to create a much more favorable climate for investment, entrepreneurial opportunity, and economic growth. It also recommends “putting limits on the state government’s role as the provider of tax-funded benefits to an increasing proportion of the state’s population.”
The Off the Rails report was produced with the advice of a 23 member Project Advisory Group.
It can be found here. (16pp, pdf format).
The Ethan Allen Institute, founded in 1993, is Vermont’s independent free-market think tank, working to educate Vermonters on the fundamentals of a free society.
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