State of the State:  Vermont

In his final State of the State address, Governor Peter Shumlin outlined his 2016 agenda and discussed fiscal policies such as the Vermont Enterprise Fund, marijuana legalization and local school spending caps. Unfortunately, Vermont’s economic outlook has ranked 49 or dead last in the nation in all eight editions of the Rich States, Poor States ALEC-Laffer State Economic Competitiveness Index.

The Enterprise Fund provides taxpayer dollars to incentivize businesses to come to Vermont or to stay in the state. The governor discussed enhancing and expanding the fund in his state of the state address. However, he did not specify the level of funding or how the legislature would raise the funds. The Enterprise Fund is a great example of the growth through central planning approach outlined in the ALEC Center for State Fiscal Reform study, The Unseen Costs of Tax Cronyism: Favoritism and Foregone Growth. This approach picks winners and losers by giving out taxpayer dollars to certain industries at the expense of others. Instead of picking winners and losers, broad-based taxes with low rates is a more effective strategy for economic growth.

Legalizing, regulating and taxing recreational marijuana was another fiscal topic in the governor’s state of the state address. A key part of the legalization proposal is to tax the sale of marijuana and use that tax revenue for government addiction programs. The governor did not elaborate on the structure or rate of this proposed tax in his speech.

Finally, Shumlin proposed repeal of the local school spending caps the state assigns to each school district as outlined in Act 46. The governor proposed a one-year moratorium on the act’s spending caps if outright repeal would not pass. He asked for a bill before school boards prepare their budgets for Town Meeting Day on March 1.

Governor Shumlin’s state of the state address reveals Vermont lawmakers have a busy legislative session ahead. Unfortunately, these proposed reforms did not address Vermont’s high taxes and uncompetitive business climate, which is a key obstacle to opportunity for Vermonters.

This article is part of the ALEC Center for State Fiscal Reform series, “State of the States 2016,” which analyzes tax and budget issues raised in every state of the state address delivered by America’s governors. Check back frequently over the coming weeks to see the results for your state.