Roper: Vermont better become business friendly ASAP

By Rob Roper

Due to the COVID-19 shutdown, Vermont has gone from one of the lowest unemployment rates in the country to one of the highest. According to the Vermont commissioner on Labor, 90,000 Vermonters have applied for unemployment insurance. That’s out of a total workforce of about 340,000. As we come out the other side of this, putting policies into place that encourage rapid employment, capital investment in new and old businesses, and entrepreneurial creativity must be our number one priority. Policies that present obstacles to this must be set aside or removed.

Even before COVID when the nation’s economy was booming, Vermont was struggling under the burden of high taxes and complicated regulation. So much so that in January the British financial magazine The Economist noted in an article that “In the past decade Vermont’s GDP has grown at two-thirds the rate of America’s. Critics point to a mountain of red tape and regulation.” Because of that red tape and regulation, Vermont never really recovered from the last recession. This was bad enough then; it is unacceptable now.

Rob Roper is the president of the Ethan Allen Institute.

Current estimates show Vermont facing as much as a $430 budget shortfall for the 2021 budget year. We are looking at a potential 25 percent property tax increase to cover the pre-K-12 education budget. Potential tax increases discussed to fill the hole include increasing the 6 percent sales tax by a penny or two, expanding the sales tax to services, adding or increasing “sin” taxes to candy, sugary drinks and tobacco products, taxing clothing over $150, and taxing “cloud” based services.

Respectfully speaking, this is not the way to go. Thinking of my barber, who has had to close her shop and forgo income for two months, is the Legislature really going to tell her that as she tries to open back up she’s going to have to shoulder a massive property tax increase on her small Main Street shop and start collecting, tracking and remitting a new sales tax for which she will have to increase prices on her also financially strapped customers? This is not how to re-open an economy.

Additionally, the Vermont Legislature has been hostile to people working as or employing independent contractors, even when both sides are desirous of the arrangement. This has to stop. The sad reality is that many businesses will not be able to reopen even when allowed. We are going to need new businesses cropping up in their place. People are going to have to be creative in finding employment for themselves and others, and the state is going to have to take steps to make it easier, not harder, for them to do so.

And, lastly, we need to reform our tax structure in such a way as to attract large amounts of private investment capital, which means allowing for competitive returns on investment. High up-front regulatory costs coupled with confiscatory tax rates — our current policy — is the opposite of how to do this. Vermont legislators have preferred an economic growth model of picking winners and losers, subsidizing with tax money the endeavors of the favored, and crushing with taxes and red tape the unwanted (at least according to them). This approach was failing before the economic crisis, and it is an impossible formula now.

It is, therefore, disheartening to see the Vermont Senate taking up bills like the Global Warming Solutions Act, as this bill’s purpose is to quash economic activity that results in greenhouse gas emissions — which is nearly all economic activity. If ever there was a wrong place and time for a piece of legislation, this is it.

Vermont has a reputation for being unfriendly to job creation. All the rankings put out by financial publications, tax watchdog groups, etc. place our state at or near the bottom. We must move quickly to reverse both the reality and the perception of this or we’re going to be in real trouble for a long time.

Moving forward, helping people get back to work and rebuilding their financial security has to be the number one objective of every state policy, whether it is returning to an old job that’s coming back on-line, moving into a new job that didn’t exist before, or creating a job for one’s self where no other job is available. Every policy should be examined through that lens.

Rob Roper is president of the Ethan Allen Institute. He lives in Stowe.

Image courtesy of Public domain
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6 thoughts on “Roper: Vermont better become business friendly ASAP

  1. Rob, As I’ve said time adnaiosium, it will be the same old, same old of solving all fiscal problems by tax, tax, tax as long as Vermonters continue to keep these total incom incompetent, feel good dreaming Dem/Prog/Libs in Montpelier. It’s not rocket science.

  2. Wind and Solar Subsidies Provide a Bonanza for Wall Street

    This URL shows wind and solar prices per kWh would be at least 50% higher without direct and indirect subsidies. They would be even higher, if the costs of other items were properly allocated to the owners of wind and solar projects, instead of shifted elsewhere. See below section High Levels of Wind and Solar Require Energy Storage.

    This URL shows about 2/3 of the financial value of a wind project is due to direct and indirect subsidies, and the other 1/3 is due to electricity sales.

    – Indirect subsidies are due to federal and state tax rebates due to loan interest deductions from taxable income, and federal and state MARCS depreciation deductions from taxable income.

    – Direct subsidies are up-front federal and state cash grants, the partial waiving of state sales taxes, the partial waiving of local property, municipal and school taxes. See URLs.

    Any owner, foreign or domestic, of a wind and/or solar project, looking to shelter taxable income from their other US businesses, is allowed to depreciate in 6 years almost the entire cost of a wind and solar project under the IRS scheme called Modified Accelerated Cost Recovery System, MARCS. The normal period for other forms of utility depreciation is about 20 years.

    Then, with help of Wall Street financial wizardry from financial tax shelter advisers, such as BNEF*, JPMorgan, Lazard, etc., the owner sells the project to a new owner who is allowed to depreciate, according to MARCS, almost his entire cost all over again. Over the past 20 years, there now are many thousands of owners of RE projects who are cashing in on that bonanza.

    Loss of Federal and State Tax Revenues: The loss of tax revenues to federal and state governments due to MARCS was estimated by the IRS at $266 billion for the 5y period of 2017 – 2021, or about $53.2 billion/y.
    The IRS is required to annually provide a 5y-running estimate to Congress, by law.
    The next report would be for the 2018 – 2022 period

    The indirect largesse of about $53.2 billion/y, mostly for wind and solar plants^ that produce expensive, variable/intermittent electricity, does not show up in electric rates. It likely is added to federal and state debts.

    Most of the direct federal subsidies to all energy projects of about $25 billion/y also do not show up in electric rates. They likely were also added to the federal debt.

    Most of the direct state subsidies to RE projects likely were added to state debts.

    The additional costs of state-mandated RPS requirements likely were added to the utility rate base for electric rates.

    * BNEF is Bloomberg New Energy Finance, owned by the pro-RE former Mayor Bloomberg of New York, which provides financial services to the wealthy of the world, including providing them with tax avoidance schemes.

    ^ In New England, wind is near zero for about 30% of the hours of the year, and solar is minimal or zero for about 70% of the hours of the year. Often these hours coincide for multi-day periods, which happen at random throughout the year, per ISO-NE real-time, minute-by-minute generation data posted on its website. Where would the electricity come from during these hours; $multi-billion battery storage, insufficient capacity hydro storage?

    Warren Buffett Quote: “I will do anything that is basically covered by the law to reduce Berkshire’s tax rate,” Buffet told an audience in Omaha, Nebraska recently. “For example, on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”

  3. The legislators, etc., who are pushing the FORTRESS VERMONT GWSA, are the same people who pushed the failed electricity programs of the past.

    If I take my recent GMP bill and divide by total kWh, I get 21.5 c/kWh; that is much higher than the phony numbers being bandied about, because it includes about $10 for the boondoggle called Efficiency Vermont, plus a socialistic surcharge for needy people.

    Similarly my COMCAST bill includes a socialistic $11 charge for closed circuit television, something I NEVER WATCH. What are these idiotic legislators thinking when they come up with these hare-brained schemes?

    Why are Vermont career-bureaucrats and career-legislators advocating electricity storage systems costing $1.2 BILLION, as a down payment, towards creating “FORTRESS VERMONT”?

    There are no good engineering reasons.
    Vermont should have strong connections to nearby grids as well, just as Germany, Denmark and Ireland.

    LAES and Battery Systems in the NEK: However, this about liquid air energy storage, LAES, and battery storage systems in northeast Vermont, NEK, because future 600-ft tall wind turbine systems on pristine, 2000-ft-high ridge lines are “planned” for that sparsely populated area, which has a weak grid to serve its low electricity demand.

    The high electricity demand is in the west side of Vermont, i.e., Manchester, Burlington, Montpelier, Rutland, etc., but the people in those areas do not want wind turbines, per NIMBY syndrome.

    It is no accident Highview Power, a UK company, eager to do more business in the US, has been talking with Vermont Electric Co-op about its LAES systems.

    The storage systems serve to reduce the disturbances that wind electricity would otherwise impose on the weak NEK grid.

    Clean Energy Development Fund: CEDF, likely would grant 50% or more of any capital cost required to build LAES systems to make the “numbers” look better; CEDF used to be funded by Vermont Yankee and ARRA funds.

    With enough subsidies, even pigs can be made to fly!

    NOTE: VY produced 4.7 billion kWh/y of steady electricity year after year, with no particulates, near-zero CO2, at about 4.5 to 5 c/kWh. It was a major benefit for the Vermont economy. Closing VY was sold by Shumlin as a victory. In reality, it was Shumlin shooting Vermont in the foot to get re-elected.

    Fortress Vermont: Career-legislators/career-bureaucrats have come up with a catchy slogan, Fortress Vermont, to fool Vermonters, and make it easier to get to their wallets and bank accounts.

    No other state is aiming to be a “Fortress” regarding renewable energy

    All is just a ploy to get money, extracted from ratepayers and taxpayers, so CEDF could distribute largesse throughout the state to favored folks, such as the politically well-connected RE companies.

    The tax payer funds would be used for subsidizing the building of excessively expensive energy systems that later turn out not to adequately reduce CO2 at a reasonable cost, as with:

    1) The grand stupidity of ASHPs in energy-hog houses; owners have annual losses and little CO2 is reduced.

    2) EVs replacing gasoline vehicles; much less CO2 is reduced than touted by EAN, et al.

    3) Expensively and inadequately weatherize energy-hog houses, which still would not allow 100% space heat from ASHPs!!

    Remember, these are the same folks who, some years ago, colluded to set up a subsidized program to have ASHPs in energy-hog houses, which turned out to be an expensive flop for almost all homeowners, but a bonanza for Efficiency Vermont “approved” installers, and Japanese ASHP manufacturers.

    Remember, these are the same folks who, some years ago, colluded to set up a plethora of heavily subsidized energy programs that had the net effect of:

    – Lining the pockets of the politically well-connected
    – Imposing a lot of extra costs on the hard-working people, trying to make ends meet, in the near-zero, real-growth, Vermont economy.
    – Not reducing CO2 from 1990 to 2020, despite investing about $5.4 billion in energy systems over about 30 years

  4. Last Saturday I needed a hydraulic hose for machine. Bought it locally for $53, and that was after a 10% discount. Monday I went to hardware store in New Hampshire for more parts that were not available locally. The same hose was $39. — That is the tax and regulation cost of doing business in Vermont.

    We need to remove every liberal from the legislature and the nutty liberals in the bureaucracy that dream up rules. — I bet I sell my house and move to another state before that happens.

  5. Vermont better-become business-friendly ASAP, well that’s not going to happen
    any time soon unless we clear the state house of its ” leftist loons ” if it’s not taxed
    already it soon will be and what business wants that burden.

    As an overtaxed Vermonter, liberals have gone to the property tax well too often
    and the well is dry to support an over-inflated education system it’s time to stand
    up and say ” No More ”

    Wake up people, send these fools packing !!!

  6. Thanks Rob – another voice of sanity and reason in a state w/a governor gone mad. Keep up the great work 🙂

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