More exceptional statistics for Vermont, though not the kind one wants.

As you may have heard, fewer people are buying and reading newspapers all over America. As you may not have heard, the fewerness in Vermont exceeds the national average, which was about 10.8 percent in the third quarter.

A few Vermont papers did better. According to the Audit Bureau of Circulations (that’s the outfit that does the counting) circulation was down “only” six percent at the Bennington Banner. But daily circulation at the Brattleboro Reformer, and the Barre/Montpelier Times-Argus dropped by more than ten percent, and on weekdays, the Rutland Herald circulation was down 12.5 percent.

Sunday circulation at the T-A and the Herald, both owned by the same company, was down somewhat less. Still, nothing went up.

But then, nothing went down like the state’s biggest paper. Weekday circulation at the Burlington Free Press dropped a whopping 14 percent, to 33,489 copies. At the Freep, too, the Sunday decline was somewhat smaller, down “only 9.7 percent, to 42,180.

Let us be charitable. These results do not prove that the newspapers are not doing their job. To begin with, many readers now choose to get their news on the Internet, but they do it on the newspaper web site. So in theory, the Freep and the other papers could be reaching as many readers, but on pixel instead of newsprint.

But that’s true all around the country. Vermont circulation was still down by more than the national average. (Though some papers did worse; circulation at the New York Post, a journal some of us would pay a daily fee not to read, has plunged almost 30 percent in the last 30 months).

Then, too, circulation went down partly because the price went up, to a dollar for the Rutland and Montpelier papers, to 75 cents in Burlington. Basic economics: the higher the price, the lower the demand.

Especially if, as the price goes up, the quality goes down, a description which, alas, fits.

Meaning there is opportunity to get that circulation back up again, and toward that end, the News Guy herewith offers a daring suggestion to Vermont’s general circulation newspapers. Considering the tenor of the times, this suggestion might seem bizarre, beyond the comprehension of today’s editors.

But with that warning…here goes!

You might try to…uhhh…well, let’s just come out with it—COVER THE NEWS.

Which was decidedly not done last Saturday when four of the five Democratic candidates for governor (and an articulate representative of the fifth) spoke to a bunch of environmentalists in Randolph.

In other words, they held a major political event, and nobody showed up.

Well, among daily newspapers, nobody but (assuming the News Guy’s Internet search was adequate) the Valley News, published in Lebanon, N.H., but covering Vermont that day better than any paper published in Vermont.

Shay Totten was there for Seven Days and so was Anne Galloway for her new vtdigger web site (and thanks to the folks at Green Mountain Daily for alerting the News Guy to her contribution). Want to know what the candidates said? Vtdigger has some YouTube from the event.

No, the News Guy was not there, partly because he assumed the event would be widely covered, and one purpose of this site is to cover what others do not. Who woulda thunk this event would fall into that category?

Continuing to be charitable, an editor might have thought: It’s Saturday. My good reporters don’t want to spend part of the weekend working. If I send one I have to give him/her a compensatory day off when I might need him/her more. Beside, we all know what Democrats are going to say to enviros; they’re gonna pander to them.

As they seem to have done. Still, no excuse. Four candidates for governor in one room on one day with a bunch of activists is news, dammit. Cover it.

You never know: folks might decide to start buying your paper again, over-priced though it may be.

Vermont’s business establishment thinks taxes should be lower.

No surprise. Business establishments almost always think taxes should be lower, and it is likely that the counterparts of the Lake Champlain Regional Chamber of Commerce and the Greater Burlington Industrial Corporation in the other states would make the same argument.

But in making their case to the Blue Ribbon Tax Structure Commission, the business leaders did not simply express a preference about tax rates. They called for a major overhaul of the state’s taxing and spending systems.

Perhaps more important, they based their proposals on an assumption: that lower taxes – especially lower taxes on the highest earners – would benefit all Vermonters by leading to faster economic growth.

A few points before proceeding:

–Some of the proposals in the LCRCC/GBIC presentation make sense. Consolidation of schools and school districts, for instance, (though it is outside the scope of the Blue Ribbon Commission) is an idea being discussed across Vermont’s political spectrum;

–The business leaders are not reverting to the role of old-fashioned robber barons. Their report begins by agreeing that “state government exists to ensure our public safety and provide services to those who are disadvantaged to maintain or improve their quality of life.” That’s apparently what led Bill Schubart, the Blue Ribbon panel’s chair, to say he was “impressed by how little whining there was…The business community isn’t just coming in and purely saying, ‘we’re overtaxed.’”

–They’re not going to get most of what they want. “We’re not going to revolutionize the Vermont tax system,” said Schubart, indicating that he and his two fellow commissioners are more likely to propose some limited – if consequential – “nibbling around the edges.”

Still, that basic premise of the business leaders – that lower taxes and a less progressive income tax system would make the state’s economy grow faster – deserves examination. Their argument that lower tax rates would actually “collect more tax revenue ” by “encouraging more people to become income tax paying residents of our State and by encouraging more businesses to stay and new ones to relocate” has become part of the established wisdom in much of the state, regularly repeated in news stories (which rarely question it) and on editorial pages.

So is the assertion that “we cannot continue to have a tax structure that reduces the state’s economic activity and penalizes wealthy Vermonters.”

It seems like a tough sell. The connection between low taxes and faster economic growth is…well, it isn’t, at least on the national level. The U.S. economy grew more than three times faster in the higher-taxed period between 1950 and 1980 (average annual 2.3 percent growth) than it did in the lower-taxed period that followed (average 0.7, and that’s ending in 2007, before the recession).

Furthermore, at least until the recession began, Vermont’s economy was growing tolerably well, about as well as other states in the region. In fact, it’s doing better than most other states now – lower unemployment rate, lower poverty rate, lower foreclosure rate.

But let’s begin by asking just how “progressive” (meaning the richer a taxpayer, the greater a percentage of his/her income is taxed) Vermont’s tax system really is.

Not very. A report by the Institute for Taxation and Economic Policy (a liberal group, but its numbers, if not its proposals, are widely accepted) found that “low- and middle-income families in Vermont pay more of their income in state and local taxes than do the richest families in Vermont.”

That report is now 16 years old, and this year the Legislature made the tax system slightly more progressive by eliminating some tax deductions that mostly benefitted the wealthy. On the other hand, Act 68 and the accompanying sales tax increase made the system slightly less progressive in 2003. All in all, there is scant reason to doubt that the ITEP’s conclusion still holds.

But it may not make much difference. Because ITEP found that no state had a progressive tax structure. If Vermont taxes are relatively more progressive than those of other states, taxes still might create an incentive for businesspeople to leave, taking their businesses with them.

Except that there isn’t much tax incentive to move the business because Vermont’s corporate and business taxes are not particularly high.

“To see whether (people are) taking jobs and businesses (away), you have to go to business taxes,” said economist Tom Kavet. “In terms of business taxes, we’re more competitive, especially if you look at effective business and corporate taxes.”

Still, there is no doubt that Vermont’s personal income taxes for the wealthy are on the high side, raising the possibility that some of them will go where they will pay less.

As some have, notably Glen Wright, who moved from South Hero to Florida, which has no personal income tax, saying “the tax burden in Vermont has become more than we are willing to bear.” (Discussed by the News Guy in June, here and here).

He’s not alone. Other Vermonters have moved to Florida and other low-tax states partly or largely for the tax savings. For many of them, it makes perfect sense.

But this evidence is purely anecdotal. It would be persuasive if backed by statistics showing that, for instance, Vermont had fewer wealthy residents, or at least a smaller percentage of wealthy residents, many of them having fled the high taxes.

But Vermont has more wealthy residents than it had five years ago, ten years, or – probably – ever in its history.

Not just more in raw numbers, but a higher percentage. Clearly, the number of rich folks who like it here just fine is far greater than the number leaving.

Let’s repeat and elaborate on that a bit because it would seem to provide a conclusive end to the discussion. There were 3,734 Vermont households reporting $300,000 a year or more income in 2007. There were 1,630 in 2000.

The same holds true elsewhere. In 2004, New Jersey increased its personal income tax on individuals earning more than $500,00 a year. Four years later, a study by scholars at Princeton found that there were substantially more such folks in the state, tax hike or no.

Had some rich New Jerseyans moved away? Yup, but mostly to higher tax states. State and local taxes, it seems, simply aren’t a big factor in determining where people live.

How can that be? Don’t incentives matter?

Sure, but so do other factors, such as the ability to make money. You can make a lot of it in New Jersey. Or, more accurately, in nearby Manhattan. The way to end up with more money is to earn more money, even if state and local taxes are somewhat higher.

That’s because state and local taxes are simply not that high, especially for wealthy people. It is true that the wealthy pay an increasing share of all the income taxes paid. But that’s because – both nationally and in Vermont — they have an increasing share of all the money earned. But as shown by economists Emmanuel Saez and Thomas Piketty, wealthy taxpayers actually pay a smaller share of their incomes in all taxes. (See graph above).

You know what else seems to be a good place to get rich and stay rich?

Vermont. Otherwise, the number of wealthy folks wouldn’t have doubled in seven years, and risen even more over a longer time period. Otherwise, more people wouldn’t be moving into the state than out of it. And otherwise more of the in-migrants wouldn’t be relatively affluent. Affluent people don’t move into places with no economic opportunity

In short, the argument that lowering the taxes on upper-income Vermonters would speed economic growth in the state appears to be grounded on nothing. It isn’t just that there is no real evidence to support the assertion; almost all the evidence refutes it.

No doubt Vermont’s tax system could be improved. The Blue Ribbon Commission might improve it. Some of those improvements might involve identifying a particular tax that creates a disincentive to invest. Such taxes exist.

And there may be an argument to be made for making the tax system less progressive and reducing the taxes paid by the rich. That argument might be moral, political, philosophical, or economic. But can the economic growth claim, fellas. It’s a fraud.

(NOTE: If you missed Wednesday’s post, please scroll down and read it)

It is to Bill Schubart’s credit both that he understands that the “blue ribbon” panel on which he sits might be something of a political sham, and that he’s taking it seriously anyway.

Even shams sometimes come up with something useful.

Schubart, a Hinesburg businessman, is one of three members and, for now, the chairman, of the Blue Ribbon Tax Structure Commission, a little-noticed (at the time) provision of this year’s state budget bill, the one the Legislature passed over Gov. Jim Douglas’s veto.

The Commission, according to the legislation that created it, is to look into possible “improvements and modernization (and) long-term vision for the tax structure,” aiming toward “a tax system that provides sustainability, appropriateness, and equity.”

Somehow they forgot to include the provision endorsing motherhood, apple pie, truth, justice, and the American way.

Actually, the wording of the statute indicates that at least some of the folks who designed the Commission really took it seriously. The law orders the Tax Department and the Legislature’s Joint Fiscal Office to cooperate with the Commission, and it gives the three-member panel a specific, interim, objective: to recommend by next January whether state income taxes should be leveled on adjusted gross income or taxable income.

Say what?

Probably not a common topic of conversation at the dinner table or the corner saloon. “Hey, where do you stand on the adjusted gross versus the taxable?” is not a question commonly heard.

A fact that does not render the question unimportant. The answer could save you money.

Unless it costs you money.

As could the other questions the Commission will ponder, even if it is determined not to recommend an aggregate tax increase.

“Any change we make will be with the goal of being revenue neutral,” Schubart said.

Any proposed change, then, will deal not with the total amount to be raised by taxes, but with who pays how much.

That’s why you should watch your wallet.

And because any suggestion to redistribute the tax burden is (and ought to be) political, that’s why it’s reasonable to wonder about possible political motives behind the Commission’s creation.

Schubart did, enough that he asked House Speaker Shap Smith, who appointed him, whether he and Senate President Peter Shumlin were serious about the Commission’s work.

“Based on no guarantees and nothing specific, and not just that I’m the eternal optimist, but I believe they’re serious and they do want recommendations,” Schubart said.

Doubt is warranted because, to understate the case, it is not unprecedented for elected officials to divert criticism from powerful interests by creating some kind of study commission. Lots of states do it. Schubart said he and his fellow-commissioners (former Gov. Howard Dean’s administration Secretary Kathy Hoyt and William Sayre of Associated Industries of Vermont) have already asked members of similar study groups in other states, “has your legislature had the courage to make (the recommended) changes?”

Rarely.

Still, the fact that the Vermont commissioners have been in touch with their counterparts elsewhere indicates that they are taking their mission seriously. They have already held five hearings, amassed copious information from other states, and taken testimony from business leaders and economists in Vermont (and it’s all available on line).

But there’s a problem. The Commission’s job is to look at how Vermont raises its money, but not how it spends it, or how much it spends. Since, as the great economist Milton Friedman put it, “to spend is to tax,” the Commission’s undertaking is unavoidably limited.

And what it is limited to is the distribution of the tax obligation. It cannot recommend spending more or spending less, meaning it can not recommend taxing more or taxing less. It can only recommend redistribution.

Meaning the process borders on politics, if it does not cross that border. If the total spent and raised does not change, the only change will be in who pays how much. And if somebody pays less, somebody else is going to have to pay more.

That’s simple arithmetic, but in this case also simple politics, because the politically organized, well-financed, and assertive faction in this argument has been the faction that claims the current tax system is too progressive, that it “penalizes wealthier Vermonters,” in the words of the presentation to the Commission by the Lake Region Chamber of Commerce and the Greater Burlington Industrial Corporation.

But if wealthier Vermonters pay less, then non-wealthy Vermonters will have to pay more. Considering that there are a great many more non-wealthy – voting – Vermonters than wealthy ones, that’s a political non-starter.

True, the two business groups also propose spending cuts, but they are beyond the Commission’s purview, and therefore moot.

Schubart said that with precise fine tuning, some objections of the business community can be dealt with without raising taxes on middle-income earners.

“Maybe certain parts (of the tax code) are too progressive and others not progressive enough,” he said, “some places where the wealthy get an easy ride and others where they get hammered.”

Perhaps, but that seems to be far less than some upper-income activists want. It was pressure from them that may have inspired Smith and Shumlin to establish the Commission in the first place. They have taken the initiative in the debate, and already set some terms of the discussion. Thanks to some intellectually lazy journalism, they have succeeded in setting some of those terms in a manner which distorts rather than informs.

In its coverage of the October 3 Commission meeting, the Times-Argus reported statistics that the “slightly more than 10 percent” of taxpayers who earn more than $100,000 a year “will foot more than two-thirds of Vermont’s total tax bill,” while the one-fifth of one percent who earn more than $1 million “will be responsible for a full 15 percent of total tax revenue.” On Vermont Public Radio, the usually astute Jane Lindholm repeated the same figures when all three Commissioners appeared on Vermont Edition on October 27.

Accurate but irrelevant, essentially a comparison of apples and baboons. The appropriate comparison with money is money, not people. That 10 percent who earn more than $100,000 a year brought in 44.8 percent of all the money earned in 2007, according to information presented to the Commission by economist Tom Kavet, a big jump from the 33 percent they earned in 2000 (and paid not more than two-thirds of the taxes, but 61.9 percent.)

As for the 531 households (not people) who earned more than $1 million, they took in more than 9 percent of the total adjusted gross income.

That still means the wealthy paid a greater share of taxes than their share of income. But that’s precisely how progressive taxation is supposed to work.

Is Vermont’s tax schedule too progressive? A good question, the answer to which depends on all sorts of considerations, some of them subjective.

But the people who argue for less progressivity rest their case on an assertion that lower taxes for the wealthy would benefit everyone by perking up the state’s economy. That’s not a subjective assertion. It can be examined via empirically testable evidence.

We’ll examine it Monday.