John LaBarge: Does Vermont have a taxing capacity?

Editor’s note: This commentary is by John LaBarge, of Grand Isle. He is a former representative of Grand Isle County in the Vermont House of Representatives.

Recent reports by Vermont legislative chief economists found the state could lose out on $430 million in tax revenue next fiscal year due to COVID-19. It is also projected the state will bring in $146 million less in the final months of the current fiscal year, and that doesn’t include another $166 million loss expected due to delays in tax due dates. It’s not clear if these figures included a possible increase in income tax refunds to Vermonters because of personal income loss. These are current projections and could increase or decrease according to how Vermont recovers from this pandemic. The federal government is helping to cover loses by providing Vermont with $1.2 billion in funding, but it contains stipulations as to what the money can be used for. Vermont’s 2020 state budget was $6 billion. So, if we are determined to keep the same level of services and programs in 2021, how can we do it given the projected loss of $596 million in revenues?

John Labarge

John Labarge

As the Vermont Legislature and the administration look to solve this major deficit, they need to be aware that Vermont could have a tax capacity issue.

One economic study defines taxing capacity as the ability of individuals and businesses to pay taxes. It is not the ability of taxing authorities to raise revenue. It also points out that if a state were to provide for all the needs of its citizens, then, in theory, it could tax away their entire incomes and taxable capacity would be 100 percent. However, if people provide for most of their needs out of incomes they receive, a government can therefore take away only a certain percentage of their resources in taxation.

We all know that people have left Vermont for states with lower taxes. Higher income earners leave for states where there is no income tax. Younger middle-class workers have left for greener pastures where they can find better jobs, a lower cost of living, and keep more of their paychecks. According to the Joint Fiscal Office report, Vermont lost thousands of people with incomes of under $100,000 a year. Outward migration was particularly high among 45- to 64-year-olds earning $25,000 to $75,000. JFO also says high earners moving here saw their incomes decline 22 percent on average the year after the move.

For more than two decades the liberal Democrats and Progressives controlling Montpelier have shown us several things. First, they have never met a tax or fee increase they couldn’t fall in love with. Second, their education funding scheme creating a statewide property tax in an attempt to lower property taxes has failed miserably and their only solution to fix the problem is to raise more taxes to put into the dwindling education fund.  Lastly, they have shown little to no interest in streamlining government; addressing waste, fraud and abuse; or making cuts of any kind.

Consider a recent quote from Sen. Mark MacDonald referring to the state college closings. For decades the state Legislature has underfunded our state college system. So, when asked why the Legislature has created this problem, MacDonald said, “Well we haven’t had a governor who wants to raise taxes to put into state colleges for … eighteen years.” And there it is — the problem-solving mentality prevalent in Montpelier. If Vermont has a problem, it just raises taxes and fees or creates new tax sources to fix it.

If the Legislature responds to what could be Vermont’s largest fiscal crisis with the same old mentality, we could find out Vermont does have a tax capacity that could be breached and cause major long-term economic harm to our state.

Will the Legislature finally get it? Time will tell.

Images courtesy of Flickr/401kcalculator.org and John Labarge
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11 thoughts on “John LaBarge: Does Vermont have a taxing capacity?

  1. Unless you are dead or move they’ll keep taxing you. Well, guess that’s not true either as they’ll get you on an estate tax too huh?

    Guess the only way out is to move.

  2. What is more economically harmful to the future of Vermonters than gutting the public education system?

    $596 million is one half of the $1.2 billion received. That sounds like a surplus, not a deficit.

  3. Raising taxes is easy. Now comes reality, with folks unable to afford basic needs such as food and shelter, ie rent and/ot mortgage payments, how in heaven’s name can one expect these folks to pay these ever rising taxes???? Is anyone in Montpeelier paying any attention????? Doubtful.

  4. Mark Macdonald is from my district and he is totally clueless. I stopped voting for him years ago. He responds with all the usual platitudes.

  5. I will not be paying my property tax this year. I’m looking forward to seeing how harshly my Town and the State respond.

    I intend to push the issue for as long as possible, and encourage others to do the same. If there was ever an opportune time to starve our free-wheeling, progressive legislators from wasting our money – it’s right now.

    • if the spending doesn’t kill us, the debt and under-funding will – at the local, state and federal levels..
      We are in debt very very deep nationwide, with Vermont as one of the most irresponsible.

      Maybe looking at our Twin, New Hampshire. They have twice our population –
      We have twice as many gov’t employees
      So our Gov’t payroll burden per citizen is 4 times as great as our twin state.

    • Your approach would have merit only if employed by those without the burden of a mortgage. Most have property tax included w/ the monthly payment. Not sure what effect withholding tax from the monthly payment would have on mortgage status.

      Still, the effects of a few thousand withholdings makes for an interesting scenario.

      • It really does have some merit. Just think even if all republicans…..33% of the state said I’m not paying this year, I’ll pay it next year. The cash flow crunch would be epic.

        Perhaps a little tax bill burning celebration on the state house lawn. You need many, many people to do it, otherwise it just becomes a personal burden where you pay extra money on your tax bill, the state loses nothing.

    • Put it bluntly, it depends on your Delinquent tax collector. I have reams of data and over the past years and Bruce Parker of TNR wrote two articles about my situation. I’ll ling to the article about my experience and mentioned is a Court ruling.

      Basically you have to adhere to the procedures
      1) grieve within the time frame to the Listers.
      2) Unsatisfied appeal to the BCA [Board Of Civil Authority] (note none of whom have any RE experience, mostly: a Select Board member, Town Clerk, a Lister (or two), Town Constables (many), Tax Collector, town secretary etc.
      3) Pay $70 to the state for appeal to the State appraiser and have a hearing.
      4) If not satisfied pay $250 to be heard at the VT Superior Court in Montpelier.

      Back to the property bill:
      1) Listers inflate property values for the Grand List, Higher Grand List means the town won’t need to appraise with a crap appraiser (that doesn’t need to be licensed) Townshend places a value of $11K per two acres (in the woods) and up to $44K in areas of fields and views around the Homestead. . My brother had a camp on a small pond and the town assessed the two acres at $100K per acre.

      There are remedies. The Supreme Court just ruled that property cannot be seized greater than the value of what’s owed. Being land, vehicles etc.

      Going thru the grievance procedure, visit a RE agent and obtain data of properties sold like yours. This establishes Fair Market Value (FMV).. According to Ames v Town of Danby (noted in my article), such properties can be anywhere in the state—you’ll get an argument because they don’t know the laws, their Handbook or Court decisions.

      Listers Handbook states FMV 51 places, but they don’t. They are also to maintain files of properties sold for local FMV, but they don’t. With Listers, it’s get what you can get and let the owner fight. The State Tax Dept puts roadblocks to discourage owners from fighting assessments. The Superior Court requirement is a farce, I’ll file with the local Supreme Court.

      I’ve been aggrieving my assessments about 8 years. Once you get a grievance value, cannot file again for two years. After a while they get to know you and that you’re not a push over and decisions will come better. My first grievance to the State Appraiser reduced my value $50K. Since then the tax bill has been reduced greatly. The Listers can fudge the property value for a reduced tax bill even tho the property value remains the same for the Grand List.

      For a property re-evaluation forced by the Tax Dept. the town must maintain a certain CLA value. If that value is below the margin, re-appraisal will be forced on the town. The Tax Dept is so corrupt.

      Listers are local town people who you’d think are friendly and reasonable. Not so. They don’t have a clue to real values.

      In CA and MI there’s only 1 lister per county. Any property sales establish FMV and is assessed at that value. Don’t need so many Listers. A person that had property many years, the valuse stays the same, the only increase or decrease is based on COL (Cost Of Living) government data. VT cannot be so simple. Property values are subject to manipulation by towns with no uniformity.

      The Debt Collector after 2 years (many towns are within the same year) to notice a tax sale. Corruption again. However for instance if a tax bill was $1000 and the property was $300K, they can sell only the amount of land for the tax, not the whole piece as per the US Supreme Court. The town cannot make money on dubious sales. And there are many greedy Listers where it all starts.

      Here’s my TRN article by Bruce Parker, you can see what I did. It’s very important to establish FMV for any grievance and be prepared for rejection of that. It’s against the law, but they do, especially the BCA.

      Vermont deer camp owner wins property tax victory
      https://www.sayanythingblog.com/entry/vermont-deer-camp-owner-wins-property-tax-victory/

      I have a lot more info, somehow let me know how to contact you if desired. You can download the Lister’s Handbook and other such property taxation booklets. Describing procedures. I have a lot of correspondence.

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