Checking In ...

We haven't spoken to a friend we call the "Investment Guru" since before the legislature voted to override the Governor's veto of its budget.  The IG is a professional money manager and he makes it his business to know what goes on in Montpelier and what it means to his clients' bottom line as well as his own.  With a new revenue estimate due later this week, we thought this might be a good time to check in and see what he has heard and what he is thinking.

VT: Last time we spoke, you were worried about wealthy people leaving the state to escape Vermont's heavy tax burden.  Still worried?

IG: Well, sure.  Because there is a lot more to be worried about.  The legislature went three-for-three on raising the taxes that make wealthy people think it might be time to pull the plug on their official Vermont residence and get a Florida – or New Hampshire – driver's license and voter registration.

VT: You're talking about the lowered inheritance tax exemption, the deductibility of state taxes, and the change in the way capital gains are treated, right?

IG: Exactly.  Now when they were debating the override, there were people in Montpelier saying that taxes don't make high income people and wealthy people leave the state.  So it was a good thing you published Glen Wright's article on why he was doing exactly that.  That article got a lot of people talking and the Free Press published it last weekend so the talk is still going on.  That's good.  Because I can tell you for a fact that people are leaving.  And a lot more are thinking about.  And if things get worse, that's what they'll do. 

VT:  So will things get worse?

IG: That's what I'm hearing.  We all know about the big budget shortfalls coming up, right?

VT: Estimated to be $67 million in 2010 and $140 million in 2011?

IG: You got it.  Well,  later this week, there will be some adjustments made in the revenue estimates.  They aren't going to be moving up.

VT: How bad?

IG: I'm hearing they'll be down $25 million next year.  Another $20 million to $25 million the year after that.  So instead of $200 million in deficits over the next two years, we are looking at something like $250 million to $260 million.  Give or take.

VT: And looking at more tax increases?

IG: That's all the legislature seems to know how to do. 

VT: Well, in a recent Free Press article about the budget problems, Speaker Shap Smith says, “We need to be thinking about changes we have to make at the state government level ... it’s clear we cannot continue operating the way we are operating now.”  Do you think he could put together a coalition of Blue Dog Democrats and Republicans to hold back the tide.

IG:  That kind of coalition is just about the only hope left.  But I'm not buying Speaker Smith as the man to lead it, even if he does like to describe himself as a "moderate."  But in his first term as Speaker, the legislature raised all those taxes we talked about earlier and increased spending on social programs by almost six percent.  If that is what we call a "moderate" in Vermont these days, then we are in even worse shape than I thought we were and you're going to see a lot more of the people who actually pay the taxes in this state leaving while they still have some of their money.

Comments

[Richard]

Independent Tom Salmon for Governor.

That is something to stew over...

[aynerand]

Sometimes things have to get worse before they get better. Human nature. As people we ignore all sorts of good advice from doctors who tell us to eat healthier, drink less, don't smoke. Many of just don't listen, until a big wakeup call like a heart attack happens.

So maybe VT has not yet had a sufficient wakeup call. There is no question that to this point the Legisltive leadership has not listened to "Doctor" Douglas' warnings, or from Glen Wright, VT Tiger or Forbes Magazine for that matter.

[txgordo]

I recently was in a discussion with some New North Enders that would probably describe themselves as moderate to liberal, and they are thinking about leaving (the discussion started over a property tax bill one of them received), as much as it pains them to think that way. They are finding that the government policies are ruining their little piece of paradise.

[GreggB]

Too late for a wake up call. Once the resources move they won't move back. It will take change then a full generation or two for VT to get an influx of human talent/wealth. Perhaps longer.

[Hiker61]

The fact is that more and more folks have given up on waiting in hopes that things will somewhat turn around and get better here. There really is no indication that the legislature will come to grips with the true issues and because of that the state will lose an increasing number of taxpayers and business owners that it cannot afford to do without while continuing on it's course of not reigning in spending and confiscatory taxation. Of course, the denial crowd will continue to chant that quality of life here will somehow work towards keeping dollars flowing while at the same time exclaiming don't let the door hit you on the way out. We shall surely see who has the last laugh.

[Brattleboro_conservative]

Vermont is place with a very high pain threshold, since those of us middle-class types get insulated from higher tax rates. However, as the rich and the businesses start to leave the state, the pain will be spread to the lower rungs of the ladder. Once those of us diehards have to start paying the higher bills, the screaming will really start. Those who cannot afford to move to Montana, Wyoming or other relatively less populated places are going to wake up and realize the human excrement that we have voted into office have done this to us.

I agree with AyneRand that sometimes things need to get worse before they get better. Now if we could only tax those rich Brattleboro elites until they leave Vermont, that would be an improvement.

[Chris Campion]

What's less than impressive about the most recent legislative sessions is their apparently inherent inability to even take a look at other states to do some modeling/comparison shopping to historical tax rates, growth, and state budgets. The information is out there, they are just not interested in hearing it. As much as I appreciate Gov. Douglas taking it on the chin with his veto, probably knowing it would be overridden, he's got to get the message out to those Vermonters working two or three jobs to keep the roof on: Vermont won't penalize your additional income. Vermont encourages prosperity in its citizens. Vermont will change and become a pro-business state before the revenues shrink to a trickle.

The downsides to policy-making are coming home to roost. It will get worse here before it gets better - we will recover later and less well than other states. Businesses, and the people who work for them, will have gotten the message in its crystal-clear format, courtesy of the elected leadership:

"You are not welcome in Vermont. You are free to leave, but please leave 60% of your earnings on your way out the door."

[Ed G. Mann]

Why would this Legislature listen to Tom Salmon? What would he say that Douglas didn't say?

In the Legislature, we have aged hippies, lawyers, avowed addicts of OPM, a fascist nanny faction, the yet to be armed food police, a save the newts crowd and a light sprinkling of very outnumbered business owners. This by no means comprises the loony lot.

No one has owned up to being a trained economist or a CPA. But, if there is, I'll stand corrected.

He'd be as popular as a person with the pox at a swingers party.

[the Gooch]

I'd run for state office and stand for Vermont Tiger-esque principles...

...but my job is likely to move to NH in the next year, and I'll be following right behind.

[Ed G. Mann]

Ah yes, Randy Brock! they didn't like his message before so they tossed him out as Guardian of the Exchequer.

Now he's Senator from Franklin County(?) and I stand corrected.

[GreggB]

"I'd run for state office and stand for Vermont Tiger-esque principles..."
A Tiger tried that, native Vter and all, didn't go over so well the people choose otherwise. Wonder whatever happened to that guy?

[Dennis Lukas]

Whats wrong with this picture; Home in Randolph village .25 acre, no view, assessed $244,000.00, taxes with water and sewer $5,985.00. Home in NY. 1.5 acres, river front,assessed $650,000.00 taxes $7,000.00. Business income in VT $50,000.00, Business income in NY $250,000.00.