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1 Gerald Prante & William Ahern, Tax Foundation Testimony before the Ways and Means Committee of the Vermont Legislature 1 (2007)

handle is hein.taxfoundation/taxfaavd0001 and id is 1 raw text is: FOUNDATION Tax Foundation Testimony Before the Ways and Means Committee of the Vermont Legislature To the committee, thank you for this opportunity for the Tax Foundation to testify. My name is William Ahem, communications director, and I'm joined by senior economist Gerald Prante. To sum up the testimony we're about to give, we want you to make your neighboring states sweat, even New Hampshire, especially New Hampshire. We won't have succeeded if the headline that announces your tax reform is Most Complex State Property Tax Now Most Complex Income Surtax, or Vermont Surpasses California with Nation's Highest Wage Tax Rate, or even Highly Progressive State Tax System Now More Progressive. Hopefully we can help you write a different headline. I speak partly on behalf of economist Curtis Dubay, who now works for PricewaterhouseCoopers. Last spring, Governor Douglas cited Dubay's study of state-local tax burdens, which says that Vermonters are paying the highest taxes in the nation this year, 14.10% of total state income. Skeptics thought that exaggerated, and the Joint Fiscal Office (JFO) issued a rebuttal. We replied in kind, and that brouhaha is part of the reason we're here today. The Census Bureau ranked Vermont sixth highest in their most recent year, FY 2004, and we also ranked you sixth that year. Using nationally available projections of income and taxation, Dubay then estimated that since 2004, Vermonters have risen from paying the sixth most to the most. Time will tell if that estimate is correct, but whether Vermont ranks highest or third highest or sixth highest, you should dismiss out of hand any assertion that Vermont is in the middle of the pack tax-wise, as economic development official Robert Miller was quoted saying in 2000. Despite the similar rankings, Census and the Tax Foundation are measuring somewhat different things. Census is focused on the tax collector -- its purpose is to tally every collection, no matter if it was paid by Vermont residents or out-of-staters. We're focused on the taxpayer, and our purpose is to measure how much Vermonters are sending out in tax payments, no matter where they're sending it. So the difference is non-resident payments. How large are they? Nowadays, hardly any tax increase in any state can be debated long before someone says it won't hurt much because non- residents will bear some of the burden. It's an especially common talking point for tax hikes on lodging and meals, rental cars, sales taxes, business taxes and, in Vermont's case, property taxes. And since that is happening in every state, a pernicious type of tax competition is at work. Our vision of a more neutral tax system is described well on page 13 of the JFO's Volume 1. We endorse every word of that passage, and we bemoan Vermont's recent pattern of ignoring that

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