By Jon Street | Watchdog.org
GAME ON: Shumlin says stakes to compete are “higher than ever”
BURLINGTON, Vt. – Gov. Peter Shumlin says he means business when it comes to competing with neighboring states, but Vermont‘s business tax climate could pose a real challenge.
“Vermont must compete to recruit and retain these companies, and the stakes are higher than ever,” Shumlin said earlier this month during his annual budget address.
And the stakes do appear to be high.
The Tax Foundation, a nonpartisan tax research think-tank based in Washington, D.C., reports Vermont ranks as the state with the sixth worst “business tax climate.”
The Tax Foundation looked at several different forms of taxation to determine each state’s business tax rank, including corporate tax, individual income tax, sales tax, unemployment insurance tax and property tax rates.
“Tax competition … is an effective restraint on state and local taxes. It also helps to more efficiently allocate resources because businesses can locate in the states where they receive the services they need at the lowest cost. When a state imposes higher taxes than a neighboring state, businesses will cross the border to some extent,” according to a summary of the report on the Tax Foundation’s website.
Comparatively, two of Vermont’s neighbors offer much better business tax environments. New Hampshire, for example, ranks as the eighth best in terms of the amount businesses pay in taxes while Massachusetts ranks 25th in the country. New York ranked as the single worst business tax environment in the country.
However, New York’s chief executive could be taking steps to change that.
Gov. Andrew Cuomo‘s recent advertisement blitz aims to lure new businesses into the Empire State by offering a 10-year exemption from state and local taxes. While the Democratic governor’s tax-cut initiative would apply only in certain areas of the state for certain businesses, Cuomo’s tax cuts still could provide a boost to New York’s economy.
When Shumlin was asked during a legislative breakfast to respond to Cuomo’s recent move, he downplayed the idea.
“I’m not running for president of the United States … but I think maybe our governor to the west is,” Shumlin said.
One expert, Michael Mazerov, seemed to discredit the Tax Foundation’s rankings. Mazerov is a senior fellow for the State Fiscal Project at the Center on Budget and Policy Priorities, a Washington, D.C.-based economic think tank.
“The rankings have no correlation with how states actually do economically, in terms of growth and job creation,” Mazerov told Vermont Watchdog.
“State level taxes don’t have very much impact on how well states do economically at all, but to the extent that they do, you have to look at the actual taxes the businesses are paying,” he said.
The Vermont Legislature is considering a bill that would raise the hourly minimum wage in the state to $12.50, a 43-percent increase over the current minimum wage of $8.73. That same bill would require employers to offer paid sick leave to every employee.
Rob Roper, president of the Vermont-based free-market think tank Ethan Allen Institute, told Vermont Watchdog there are factors other than taxes that could impact business growth in the Green Mountain State.
“Vermont will have a very hard time attracting business and jobs if potential employers look at us and see a Legislature that is seriously discussing raising the minimum wage … forcing employers to offer paid sick leave whether they can afford to do so or not …” Roper said.
Vermont is the only state in the country that is expected to receive a waiver from the Affordable Care Act, or Obamacare, in order to create its own single-payer system of health care insurance, which state Sen. Peter Galbraith, D-Windham, has proposed to pay for by increasing the state’s payroll tax to 11 percent.
“Other states are aggressively trying to fix their anti-business policies and reputations. Vermont is doubling down,” Roper said.
When Vermont Watchdog contacted Shumlin’s office for a response, spokeswoman Sue Allen said, “No comment.”
Contact Jon Street at firstname.lastname@example.org
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