As promised, we turn today to further, and final, thoughts inspired by Glenn A. Wright’s farewell letter to Vermont published in the Rutland Herald/Barre Montpelier Times-Argus on May 31 and examined here June 2 (“He’s Leaving Home.”).

Like last Tuesday’s post, this one intends no condemnation of Wright, the  tax accountant who recently changed his official residence from Vermont to Florida in order to save on taxes.

In a sense, he didn’t really “move” last week; he and his wife have had a home in Florida for years and have been spending a substantial amount of time there. But in addition to transferring their legal residence to Florida, they are selling their home in South Hero .

So they’re giving something up. But it’s a perfectly sensible switch. They seem to like one place as much as the other. Why not, then, stay in the place that charges several thousand dollars less in taxes? Florida has no personal income tax (and the Wrights seem to have quite a lot of income), and Wright said in his letter that the property taxes he pays on his home near Ocala are $8,000 less than he was paying in South Hero.

In their case, then, moving to Florida is what the economists would call a rational choice. Granted, “rational choice” fundamentalism has been discredited somewhat of late, but that’s because people finally figured out that some choices aren’t rational. Saving several thousands of dollars a year is quite rational. In fact, any Vermonter who claims that he or she would never even consider moving to a low-tax state just to pay less in taxes is probably guilty of attempted deception (perhaps of the self) and ought not to be taken seriously.

Assuming that we’re all rational, then why doesn’t everybody move to Florida? Or to Georgia, the Carolinas, Kentucky, Tennessee or some other low-tax (not to mention warmer) state? Are the rest of us irrational?

No, not even economically. In the first place, in all those above-named states except Florida, a typical person is likely to earn less than in Vermont. In all the others, the per-capita income is lower. In general, the more one earns, the more one keeps after taxes, regardless of the tax structure. For the most part, taxes just aren’t high enough to make that much difference.

Needless to say, the advantage of earning more in Vermont than in most of the low-tax states applies only to those who need jobs, meaning actual jobs in a particular place. It doesn’t count for retirees, or for the increasing (but still small) number of folks who can make their living no matter where they are as long as they have an Internet connection. Those are the folks you would think would leave Vermont for the lower-tax states.

And they seem to be. Wright, who is old enough to be retired but who could still ply his trade from anywhere if he has a working modem, is a good example. Surely there are others like him. They’re only being rational.

But what about all the retirees and place-independent professionals who have been moving into Vermont? Are they irrational? If so, irrationality rules, and Vermont might as well relax and enjoy it. Because there seem to be more such people moving into the state than out of it. As outlined last week, the number of upper-income taxpayers has been growing at a healthy clip.  In percentage terms, affluent people are moving into Vermont in disproportionate numbers.

Assuming that most of them are not irrational (the ‘rational expectations’ school isn’t that wrong), Vermont must not be a bad place to earn a living.

There’s another reason most Vermont tax exiles are retired, or at least don’t need jobs. Needing a job usually means living in a metropolitan area. They’re more expensive. It isn’t that Vermont is cheap. But non-metropolitan Vermont (everything outside Chittenden, Franklin, and Grande Isle Counties) is less expensive than most of the metro areas of those other states, where the jobs are.

Sure, a lot of the good Vermont jobs are in the Burlington metro area, but commuting from farther away is easier than in, say, Broward Country, Florida, or Shelby County, Tennessee. Staying here for better pay and a shorter commute, even while paying higher taxes, is a rational choice even without taking into consideration non-economic values.

Oh, yeah. Non-economic values. There are many – family, community, scenery, culture, recreational preferences, just plain old habit.

And then there’s what might be called social values, whereby hangs a question.

Not a conclusion, an assertion, or certainly a condemnation. Just the following question:

Are wealthy people who leave Vermont for a low-tax state for the purpose of paying lower taxes further enriching themselves on the backs of the poor and the disabled?

Almost all the low-tax states (Florida is a partial exception) are poorer than Vermont. Being poorer, they are less generous (or perhaps, being less generous, they are poorer, but that’s a discussion for another day). They offer less in the way of social services. Often a lot less.

Just consider Florida, where the per capita personal income is slightly higher than Vermont’s (though the per capita household income is lower), largely because most Floridians live in Metropolitan areas, where incomes are higher.

But like most other Southeastern states, Florida ‘s poverty rate is much higher than Vermont. Florid spends much less on health and education than Vermont. According to federal figures, Vermont spent $6,069 per person on health care, compared to Florida’s $5,483. In 2006, Florida spent $7.759 per pupil in its public elementary and secondary schools that year, Vermont spent  $12,614. according to an exhaustive study published last year by Susan Pace Hamill of the University of Alabama Law School.

(Hamill, a self-described member of the “religious left” does not pretend to be objective. But if her analysis is open to question, her facts are solid).

In neither health nor education does spending a lot of money guarantee good results, and certainly a case can be made that Vermont’s schools are too expensive. But not spending enough money guarantees poor results. Almost twice as many Floridians as Vermonters (20.3 percent to 10.8 percent) lack health care coverage. It is no accident, then, that in almost every health category - infant mortality, neonatal deaths per live birth, low birthrate – Vermonters are in much better shape than Floridians. (See update/correction below)

The same holds true on education. The standardized test scores of Vermont public school pupils are among the highest in the country. Florida’s are not, though considering the high percentage of low income students, the Florida schools are not doing a bad job.

Besides, it isn’t that Florida levies no taxes. Its citizens pay taxes, too, but under a far less equitable system. According to Susan Hamill’s statistics, people in the lowest fifth of Florida’s income distribution pay 14.5 percent of their income in taxes; Vermonters in the same bracket pay 9.9 percent. Floridians in the next two brackets also pay more of their income in taxes. Only in the upper-middle class fourth quintile do Vermonters pay a higher percentage of their income than Floridians. The richest Floridians, though, pay more, 2.9 percent compared to 1.9 percent in Vermont. Neither state really has a progressive tax system.

In a sense, then, the real difference between the two states is just as much socio-economic equity as total tax burden. That’s a relevant point when considering the one objectionable passage in Wright’s open letter.

“The majority of Vermonters have become ‘takers’ from government and the number of ‘givers’ is not only in the minority but decreasing every day,” he said.

This would be an insult if it were remotely true. It is not. Vermont’s ratio of working people to total population (ages 15 to 65) is higher than the national average. By all available evidence, Vermont is as hard-working and as inventive as the other states.

But the point of view expressed by Wright —  and heard here and there in editorials, letters to the editor, and blogs — suggests that what bothers these folks is not just Vermont’s relatively high tax rates, but their relative progressivity, and that their proceeds go for social programs. They are beset, as Newsweek business columnist Daniel Gross recently wrote, by, “the haunting fear that someone, somewhere may be getting social insurance.” What motivates them, in other words, is not simply the money they don’t want to pay in taxes, but an active intellectual (and emotional?) hostility to economic equity.

This isn’t a condemnation, either. It’s just an observation. A case can be made, both economically and morally, for greater inequality. But advocates of that case ought to make it, rather than continuing to whine that Vermont taxes are ruining the economy, which (perhaps they haven’t noticed?) is not ruined.

(Update/correction: Those were the wrong two links. What those links show is that Vermont’s hospitals get much higher ratings than Florida’s).

Tags: equality, Florida

This entry was posted on Monday, June 8th, 2009 at 12:12 am and is filed under Business & Economy, Schools, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.