Vermont tax data shows growing gap between wealthiest, poorest

Published: 8/12/2019 8:52:53 PM
Modified: 8/12/2019 8:52:49 PM

New data from the Vermont Department of Taxes show the state has a growing income inequality gap. Vermonters in the bottom brackets have seen incomes decline while filers who made more than $1 million in 2017 reported 70% more income than millionaire filers did in 2010.

That growth accelerated in 2017 when Vermont’s millionaire filers reported 40% more income than in 2016.

The latest tax data came out in a report presented to lawmakers last week by state economists who forecast the Vermont’s revenue projections.

The growing wealth gap prompted Vermont progressives to renew calls for new laws increasing the minimum wage and offering free college tuition for low- and middle-income Vermonters.

The data show that between 2010 and 2017, the adjusted gross income — the earnings after deductions — reported by tax filers in Vermont making $200,000 to $500,000 has increased by about 70%.

Meanwhile, total income reported by filers making under $30,000 has decreased. Vermonters making $20,000 to $25,000 reported 9% less income in 2017 than they did in 2010. Filers earning $15,000 to $20,000 and $10,000 to $15,000 collectively reported about 16% less in annual income.

“The real message from these reports is that the economy is not working for everyone,” said Sen. Anthony Pollina, P/D-Washington, the chairman of the Vermont Progressive Party, who said the data show that new income “keeps going into the pockets of the wealthiest Vermonters.”

“It’s not working for low-income folks who are getting up every day and trying to make ends meet,” he said.

Middle-income earners reported slightly higher earnings in 2017 than they did in 2010, according to tax department data. But income increases in middle-income brackets are much smaller than those at the highest income levels, according to the data.

In 2017, the state saw a total of 13% more income reported by filers making $45,000 to $50,000. Those making $50,000 to $60,000 reported 7% more income, and those making $75,000 to $100,000 reported a 12% increase.

Tom Kavet, the economist for the Vermont Legislature, who compiled the income data, said it shows that in keeping with a national trend since the 1980s, “there has been faster growth in income and wealth at the high end than at the low end and lower middle.”

“Over much of that period you see a very high percentage of all the net income gains accruing to the higher income classes. That’s been a feature of the economy and has created a lot of issues,” he said.

Kavet said the data also shows how in Vermont, which taxes the rich at a much higher rate than the poor, “a big chunk of the state tax is being paid by a relatively small number of taxpayers” at the top.

Arthur Woolf, an economist at the University of Vermont, said the tax data doesn’t spell out a clear story of income inequality in Vermont.

That’s in part because while the data show how much money the group of people in a given bracket make in a given year, it isn’t specific to individual filers, and doesn’t track whether individuals have actually climbed, fallen from, or stayed in the same income bracket.

He said it’s unclear from the data whether the poor are getting richer and climbing brackets, or making less money and falling — either story could mean that there is less taxable income reported in the lower brackets.

“You really can’t say anything just by looking at those numbers,” Woolf said.

“You’ve got a story but you don’t have any evidence for either one. Either the poor are getting poorer, or the poor are moving up. Those numbers are consistent with both stories.”

Woolf doesn’t dispute that the rich in Vermont are getting richer. But based on numbers he’s analyzed, he also believes the incomes of middle-class Vermonters have increased since 2010.

Looking at the earnings of married couples between 2010 and 2017, Woolf found that the median income jump from about $75,000 to $83,000 — about 10%.

“It tells you that people in the middle are seeing an income gain, it may not be huge, but it’s a gain.”

Woolf did not have data on the income changes for Vermont’s lowest earners.

Pollina said the data is further evidence that Vermont lawmakers need to enact policies to benefit low and middle income Vermonters, like an increase in the minimum wage, and a tuition free college system.

“We’ve allowed our policymaking to be directed at ignoring the needs of low- and middle-income people and so they keep falling further and further behind,” he said.

Members of Gov. Phil Scott’s administration say the data doesn’t change the governor’s opposition to raising the minimum wage or increasing taxes to create new social programs.

Secretary of Administration Susanne Young said that the governor believes policymakers should hold off on tax increases in the event the state sees an economic downturn.

Many economists say that the long period of economic recovery and growth that the U.S. has seen since the recession in 2007 is bound to end soon, and that another recession could be in the offing. But state economists said last month a recession is not imminent.

“This particular data has not changed our minds and prompted us to say ‘Yes we need to go out and tax the wealthier more,’ ” Young said.

“We need to save our taxing capacity, such as it is, for the downtimes.”

But the Scott administration said the best way to address income inequality is by providing assistance to struggling rural communities.

While some counties — particularly Chittenden — have seen economic booms in recent years, others have been left behind, she said.

“That’s where we really are seeing the inequality. Not necessarily between households, but regions,” Young said.

Administration officials say the governor will continue to support policies like tax increment finance districts, economic development grants and increased funding for the state colleges to help prevent tuition increases.

“We’ve got to focus on what we can do,” said Adam Greshin, the state’s finance commissioner.

“And our focus has been on looking across the state at 251 towns and 650,000 people and say how can we help each and every one of them.”

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