Every year, Vermont gives away tens of millions of dollars to high-income taxpayers while cutting services for Vermonters who are struggling the most to make ends meet. Yet it is clear that Vermonters, as shown by their votes for national officeholders, don’t support this kind of approach to revenue generation and budgeting.
We regularly hear about what our elected leaders wish they could do if only the state could afford it: clean up Lake Champlain, increase the child care subsidy, invest in higher education or mental health care or job training. There’s widespread agreement that these investments would move the state forward.
Why are we not making these critical investments in our state’s future? Money, or more accurately, the perceived lack of it.
The Legislature has done a good job over the years in finding funds that don’t require broad-based tax increases for Vermonters—drawing down federal funds whenever possible, thinking creatively about how to get the most out of funds they have, and reviewing and updating fees regularly.
But there is one big rock they haven’t looked under: tax expenditures.
Tax expenditures, as the name suggests, are state expenditures made through the tax system rather than by legislative appropriation. They have the same effect, however, on the state budget as appropriations do: they reduce the amount of money the state has available to spend. But unlike appropriations, these expenditures are not scrutinized every year. Income tax expenditures, as a prime example, give away tens of millions of dollars mainly to upper-income Vermonters year after year.
Meanwhile, the Reach Up program, which is intended to help the most vulnerable Vermonters and their children with a hand up out of poverty, has been scrutinized and cut back over the years. Today, Reach Up families receive less than 50 percent of what the State calculates is the minimum amount needed for basic costs of living. In 2015, the state reduced Reach Up assistance for families who also receive disability benefits. This is not only harsh, it is counter productive. Vermont currently has a major problem, labeled the “achievement gap,” as children who grow up traumatized by poverty enter our schools unable to learn and needing services the system doesn’t provide. One result is overflowing prisons; if we don’t make needed investments now, the situation will continue to get worse.
It’s a question of priorities. Cutting tax expenditures for upper income people would give Vermont the resources to make smart investments that will improve the lives of all Vermonters. Some have said that we can’t afford to make these investments, but the fact is that we can’t afford not to.
Recently the One Vermont coalition, a group of concerned citizens and organizations committed to a state that works for all Vermonters, proposed a plan that would balance the state budget and use savings from eliminating income tax giveaways to invest in Vermont’s future. These are the right priorities for the state. Our lawmakers should act this year to capture the income tax expenditure savings so they can make some strategic investments, including those in early care and learning and higher education that the governor proposed, in the fiscal 2018 state budget.
Steven Gold was the Director of the Reach Up Program, 1993-1999; Vermont Commissioner of Employment and Training (now Labor), 1999-2002; Vermont Commissioner of Corrections, 2003-2004.