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Off the rails

03/01/07 12:00AM By John McClaughry
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(HOST) As the legislature considers how to fund education in Vermont, as well as the many other fiscal needs of our state, commentator John McClaughry is hoping that they are paying attention to a recent report on our economic future.

(MCCLAUGHRY) What happens to a state when it becomes the second oldest state in the nation, its working age population steadily shrinks, and there's no longer enough to tax to pay for its very generous education and human services programs?

Those are questions we've recently been considering at the Ethan Allen Institute, and they're at the center of a report based on research by UVM Professor Art Woolf. In short, that state may be heading "Off the Rails". The report explains clearly that, as Vermont's taxpayers are all well aware, Vermont's high level of education and human services spending is requiring ever-greater tax revenues.

By 2030, even if Vermonters are willing to devote an all time high of eighteen percent of their adjusted gross incomes to state and local taxes, more than two thirds of all tax dollars collected will be needed just to pay for K-12 education. In fact, by Dr. Woolf's projection the cost per pupil in 2030 will be an astonishing $33,400 - and that's in 2005 dollars, not inflated dollars.

Almost all of the remaining tax dollars will be required to fund human service programs. And that assumes there will be no new spending programs, like universal preschools or universal taxpayer-financed health care. Increasing tax rates in an attempt to increase government revenues is not a viable option. That would propel Vermont from fifth place to first place in state and local tax burden. Such a heavy tax burden would doom the state's efforts to stimulate wealth producing economic growth. The report notes that if Vermont had the national average tax burden, Vermont taxpayers would this year have enjoyed $227 million dollars more in disposable income.

Keeping Vermont on the rails will require transforming Vermont into the state more attractive for productive young Vermonters to stay and work in, and for productive workers from outside the state to migrate into. The report concludes by saying that "A conscious decision to implement (tax and spending restraint and pro-growth] policies will take vision and political courage. It will mean creating a much more favorable climate for investment, entrepreneurial opportunity, and economic growth, and resisting the political temptation to pick and subsidize favored enterprises. It will mean putting limits on the state government's role as the provider of tax-funded benefits to an increasing proportion of the state's population. But if Vermont's government and economy are to stay on the rails for our children's generation, there seems to be no other viable choice. We do not have decades to get this right."

I hope those conclusions are giving the 2007 legislature a lot to think about.

John McClaughry is president of the Ethan Allan Institute, a Vermont policy, research and education organization.

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