By Bill Moore
The American Legislative Exchange Council is a nonpartisan organization comprised of state legislators from both major parties and independents from across the country, located in Washington, D.C. According to its website, ALEC “provides a forum for experts to discuss business and economic issues facing the states.”
Recently, ALEC published its 11th Edition of “Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index.” This annual index considers 15 strategic “policy variables that have a proven impact on the migration of capital — both investment and human — into and out of states. The end result of an equal-weighted combination of these variables is the 2018 ALEC-Laffer Economic Outlook rankings of the states.”
So how did Vermont fare in the latest edition? In terms of the “Overall Economic Outlook Rank,” the Green Mountain State came in 49th. It is not all bad news, however, and there are a few bright spots in terms of the items reviewed.
The “Economic Outlook Rank” is based on how the state compares when the fifteen state policy variables (SPV) are measured. We ranked No. 2 for “State Liability System Survey,” which is labeled as “tort litigation treatment, judicial impartiality, etc.” We are No. 3 for “Debt Service as a Share of Tax Revenue,” and No. 7 for “Sales Tax Burden” per $1,000 of personal income.
That’s the good news. Regarding the other rankings, we do not fare so well.
We rank 43rd in the “Top Marginal Personal Income Tax Rate” and 49th for “Personal Income Tax Progressivity.” We are also 49th in “Property Tax Burden.” In the category of “Remaining Tax Burden,” we come in at No. 47.
Likely as the result of Gov. Phil Scott and the General Assembly holding the line on increased taxes and fees in 2017, we came in 32nd for “Recently Legislated Tax Changes,” an improvement from 45th in 2017. We rank 39th for “Top Marginal Corporate Tax Rate.” In the category of “Number of Tax Expenditure Limits” we rank No. 34. This measure reflects the number of state tax or expenditure limits in place. It is a measure of a state expenditure limit, mandatory voter approval of tax increases and a supermajority requirement for tax increases.
Having a minimum wage of $10.50 per hour earned us 46th in that ranking. Our workers’ compensation rate of $2.02 per $100 of payroll earned us a 37 ranking. We pulled in at No. 47 for “Public Employees per 10,000 of Population.”
We are at the bottom, 50th, for “Estate/Inheritance Tax Levied” and “Right-to-Work State.” Both categories are somewhat misleading because the review only considered whether or not the state levied the tax and whether or not it is a right-to-work state.
Our overall “Economic Performance Rank is 38. This last category is important because, according to ALEC, “The Economic Performance Ranking is a backward-looking measure based on a state’s performance on three important variables: State Gross Domestic Product, Absolute Domestic Migration and Non-Farm Payroll Employment — all of which are highly influenced by state policy. This ranking details states’ individual performances over the past 10 years based on this economic data.”
What do these rankings mean? According to ALEC, states that tax less and spend less have a higher growth rate than states that do not. As the Vermont General Assembly begins its wind-down, we encourage legislators to think about the consequences of tax-and-spend policies as they look to ways of growing the state’s economy.
Bill Moore is president and CEO of the Central Vermont Chamber of Commerce.