By Rob Roper
Gov. Phil Scott and some key legislative leaders indicated a willingness to reform Vermont’s estate tax, raising the exemption from $2.75 million to $5.75 million. This is a good step if Vermont wants to keep wealthy taxpayers as citizens rather than see them flee entirely, or simply spend six months and a day somewhere else. However, if Vermont wants to actually attract wealthy retirees, an even better step would be to eliminate the estate tax all together.
Only a dozen states plus Washington, D.C., have an estate tax (38 get along fine without one), so we wouldn’t be alone. But, among those states that do are neighboring New York, Massachusetts, Maine, Connecticut, and Rhode Island. Vermont, if we were smart, would position ourselves to be the financial as well as lifestyle destination for New England retirees who don’t want to leave the region, and, more importantly, don’t want to be fleeced when they die.
There would likely be quite a few candidates from just the Boston, New York, Newport, Greenwich areas who would jump at the chance to escape their local tax man and take in Vermont foliage season at the same time. These are people who will then build and renovate houses (construction jobs), eat in restaurants, shop in local stores, donate to and volunteer in local philanthropic entities, such as EMT services. They would be paying Vermont income taxes, sales taxes, rooms and meals taxes. How gratifying would it be to see New York Governor Andrew Cuomo complaining that Vermont, not Florida, was stealing his taxpayers. We don’t need all of them. We’re small. We just need a few.
Vermont has to have a tax strategy for attracting and encouraging some sort of economic activity. Right now, we have none. We tax, and therefore discourage, everything. We have high income taxes, 6-7 percent sales taxes, high property taxes, business taxes, estate taxes … the only low-tax strategy we employ is for the captive insurance industry, and it is tremendously successful in bringing in revenue. Why not replicate it in other areas? Retirement is an easy and sensible place to start.
Proponents of the Death Tax like the fact that it “soaks the rich.” This is shortsighted. You can’t soak the rich if they don’t live within your borders. Nobody has to live here. To harvest a crop, you need to cultivate that crop. And, to cultivate a crop sustainably, you can’t over harvest that crop. We need to cultivate a tax base, but we’re creating an economic dustbowl.
Rob Roper is president of the Ethan Allen Institute. Reprinted with permission from the Ethan Allen Institute Blog.