Vermont’s per capita tax collections have surged dramatically over the last four decades, increasing by more than 1,200%. In 1980, Vermonters paid an average of $520.70 in state taxes. By 2023, that figure had risen to $6,948.15, placing Vermont third in the nation for tax burden behind North Dakota and Hawaii, according to U.S. Census Bureau data.
The sharp increase reflects a combination of expanded public services, demographic changes, and regulatory policies like Act 250. Critics warn that this trajectory is unsustainable, with retirees and younger residents leaving the state, taking their tax contributions and spending power with them.
What’s Driving the Increase?
State services have grown significantly since the 1980s, with healthcare, education, and environmental protections accounting for much of the rise. Landmark decisions, such as the Brigham v. State of Vermont ruling in 1997, required equitable school funding, increasing property tax reliance.
At the same time, Vermont’s Act 250 land-use law, designed to protect the environment, has restricted development and contributed to rising housing costs. While preserving Vermont’s character, the law has also discouraged economic growth and added to the financial strain on residents.
Outmigration Compounds the Issue
Vermont’s high cost of living and heavy tax burden are driving retirees and younger workers to leave. Retirees, in particular, are moving to lower-tax states like Florida and New Hampshire, taking their pensions, Social Security income, and spending power with them. Even retired state employees are relocating, effectively exporting state-funded pension dollars.
This trend creates a fiscal ripple effect:
- Shrinking Tax Base: Fewer residents remain to shoulder the growing tax burden.
- Economic Impact: Reduced spending in local businesses hurts Vermont’s economy.
Experts Call for Action
Economists warn that Vermont’s current trajectory could lead to a fiscal cliff within the next decade unless the state takes action. Proposed solutions include:
- Reforming Tax Policies: Exempting more retirement income from taxation and capping property taxes for seniors.
- Reducing Spending: Consolidating school districts and streamlining state services.
- Encouraging Growth: Revising Act 250 to balance environmental protections with economic development and investing in workforce retention programs.
Conclusion
Vermont’s tax burden has risen faster than most states over the last 40 years, placing significant pressure on residents and the economy. Without decisive reforms, the state risks further outmigration and fiscal instability.
Dave Soulia | FYIVT
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