So where do you think the population is falling?

Florida, precisely the place which (to hear some talk) Vermont should emulate by cutting taxes and weakening regulations lest thousands flee to…well, someplace like Florida

Could be. But right now, Vermont’s path looks a lot safer.

Its population is growing (slowly) and it is one of the few states gaining jobs these days. It’s Florida which folks are fleeing.

The news was right there on the front page of Sunday’s New York Times, which noted that after a century of almost unbroken population growth, Florida actually lost 58,000 people between April 2008 and April 2009.

In percentage terms, 58,000 is a tiny chunk of more than 18 million. But by all accounts, the decline is continuing. And in part because of that lack of an income tax, population decline hits Florida especially hard. Without an income tax, the state relies heavily on sales and property taxes. When property values go down and people buy less (both because there are fewer of them and the ones who stay cut back), the loss of state revenue is even more acute than it is elsewhere.

Ah, but there’s hope on the horizon, some Floridians think. The state has always been a retiree Mecca, and as those millions of Baby Boomers start to retire in the next few years, perhaps many of those millions will emulate their elders and head to the Sunshine State.

But not everyone is confident that they will. The big question, the Times quoted a Florida professor saying, “is will they choose the same type of retirement as their parents.”

An interesting question because of a new study, reported here last week, indicating that Baby Boomers might be less likely to retire to Florida than to….could it be Vermont?

Well, that’s a bit of an exaggeration. When it comes to attracting retirees, Florida will continue to have two advantages over Vermont: (1) No state income tax; (2) Warm winters.

But it’s crowded, without many areas of remoteness, and as outlined here on August 19 (The Boomers Are Coming) new data indicate that in retirement, the Baby Boomers will not crave urban conveniences as much as “desirable physical attributes – pleasant climates, mountains, beaches, lakes,” and all of it far from the metro area crowds.

All of the low-tax Southern states have pleasant climates (for those who like heat and humidity), and many have mountains, beaches and lakes. But they’re all relatively crowded, which is why the News Guy speculated (without first having the chance to talk to the authors of the report) that Vermont might be a desirable destination for Baby Boomer retirees.

As it happens, one of the two authors, Peter Nelson, is a Vermonter, a geography professor at Middlebury College on sabbatical in Washington, D.C., for a year as a visiting scholar for the U.S. Department of Agriculture’s Economic Research Service, which released that study.

When reached, Nelson said that, yes, there could be a “strong propensity for these Baby Boomers to find at least certain types of areas in Vermont attractive.”

Left alone, these Boomer retirees could be economically beneficial to rural Vermont. Most of them will have some money, which they’ll spend at the local shops and restaurants. Some of them no doubt will hire locals to build, repair, or clean houses, do yard-work, and the like.

But Nelson has an idea. It’s not yet a fully-developed idea, but he plans to spend the next few months trying to develop it. His idea is not to leave these Boomer retirees alone, but somehow to enlist them – their expertise and their money – to help perk up local rural economies.

“It’s hard for communities to direct these newcomers’ energies in ways that benefit the general population,” he said. A lot of the people arriving potentially have something very meaningful to contribute but I haven’t seen a community that’s effectively organized itself to harness this potential. If you’ve got five or six retired folks from financial services, what kind of organizational structure could be developed to harness their expertise to create some employment opportunities for local people in their twenties and thirties?”

As Nelson sees it, the county economic development agencies are the best vehicle for trying to get wealthy retirees to start or finance local businesses.

“The selectboards are dealing more with day-to-day operations of municipalities,” he said. Regional economic development agencies, their charge is more how do we create a stable economy for not just a town but an aggregation of towns. They operate at larger scale.”

But he acknowledged that he was not sure exactly how to transform this concept into action, and not everyone involved in rural economic planning is convinced that the goal is realistic.

“I’m a little skeptical,” said Jerry Johnson, a political science professor at Montana State University in Bozeman, identified by Nelson as one of the scholars interested in the concept. “It’s a great idea but I’m not sure if it’s gonna fly anywhere.”

Johnson said that while he agreed that retirees want to have an impact on their new communities, they were more interested in volunteer work than in going into business,

“They work on the arts festival, at the library,” Johnson said. “They didn’t retire to start another business.”

Also skeptical, but somewhat more optimistic, was Ray Rasker, another Montanan, an economist who specializes in rural economic development.

“People don’t start up a business to create jobs,” Rasker said. “Their motivation is to make money. A side effect of it is that it creates jobs.”

But, he said, “I don’t think I would discount the wave of retiring baby boomers, people who’ve had a career, who are well-connected. “ Some, he said, “might keep working to a certain extent.”

Rasker said he thought the capital and the expertise of rural retirees could be tapped, but only if the other fundamentals of rural economic development were in place. The most important of these, he said, was protection of “environmental amenities.” After that come “good schools, high quality of life. access to markets, capital, transportation.”

As Nelson acknowledged, the importance of transportation makes economic development difficult in places such as the Northeast Kingdom, just because the nearest airport isn’t all that near.

In those areas, Rasker said, the best strategy might be to try to attract retirees by making sure local high-quality health care facilities were available.

“If I was king of economic development I’d insist on three things,” Rasker said. “Airport access, health care, education, and not necessarily university, probably more vo-tech.”

All of which, of course, costs money. So maybe the best economic development policy for places like rural Vermont requires some (selective, prudent) government spending as well as enough regulation to protect those “environmental amenities.”

Not, in other words, the Florida model, which for the nonce at least does not seem like a model to emulate.

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Hold onto your hats, folks: We have some rrrrrealllly big announcements to make about the future of News Guy.

To begin with, there will be no postings next week.

Yup, the News Guy is taking another week off. Yeah, yeah, it’s not that long after his previous week off. But William Ernest Henley to the contrary notwithstanding (in the very famous if rather bad poem, “Invictus”), no one can really claim to be “the master of my fate..the captain of my soul” (or is it the other way around?)

Just a fancy way of saying that sometimes you have to accommodate yourself to the schedules of others. Hence, next week is the week off. The next post will appear June 22, one day after the Summer Solstice.

But that’s not all. Here’s another rrrreallly big change:

Upon return, there will (usually) be but three postings a week. Expect new posts only every Monday, Wednesday, and Friday.

It isn’t that five a week is too much, though it is. But mostly, it’s too much to maintain quality. As said at the very outset of this site, some stories take more than one day to report. Committing to the daily offering threatens the onset of superficiality, precisely the scourge of Vermont journalism News Guy was created to combat.

(Do we hear some wise guy, someone with the instincts of a reporter, asking whether another factor is that it was OK to sit in front a computer all day back in December when News Guy was born , whereas now a guy might want to spend some time in his garden, in the woods, in a kayak communing with the neighborhood loon (see above), in a trout stream? OK, guilty).

The new schedule does not mean only two substantive posts and one Friday mop-up/inside info piece each week. Substance will continue to outnumber inside baseball by at least a four-to-one ratio.

Furthermore, now and then, there will be a Tuesday or Thursday offering. If an important event or development occurs on a Monday or Wednesday, the News Guy will cover it. And having been brought up in the world of daily newspapers, he is constitutionally incapable of keeping a good story to himself for 24 hours.

Readers who are registered on the site, or following via Face Book and/or Twitter (finally, a use for these thingies) will be alerted when an extra post is planned.

But, in the immortal words of The Cat in the Hat, “that is not all, no that is not all.”

There’s another rrrrreally big change in store.

And it is…….

We can’t tell you.

Not quite yet.

It involves other folks, other enterprises. The details have not yet been completely arranged. As soon as they are, you will know.

All right, enough for the future. Let’s delve into the past. There have been an unusually large number of comments and emails lately, and some of them deserve answers and/or comments.

First of all, the winner of the gold star for identifying the source of the politics/poker connection (in the June 10 post, Political Palaver) is reader Tom Stevens, who said, “I’m going with musicala obscura: Fiorello.”

The song Politics and Poker is indeed from the 1959 Broadway musical, Fiorello, which, as Stevens seems to be suggesting, has pretty much faded from memory. But it was a good show, one of only seven Broadway musicals to win the Pulitzer Prize for drama.

Reader GFB3 correctly scolds the News Guy for not mentioning the title of the school spending study by Susan Pace Hamill mentioned in the June 8 post, (He’s Leaving Home Continued). That title is  ”The Vast Injustice Perpetuated by State and Local Tax Policy.”

From that same post (and indeed from that same report,), reader Peter Joes asks, “can you explain how the highest income taxpayers in Florida pay more in taxes than in VT when there is no (Florida) income tax?

Good question. Possible, partial answers: Florida’s statewide sales tax, like Vermont’s, is six percent. But it goes as high as eight percent in some areas, probably the wealthier ones. Also, until 2007 (and the figures cited were from 2006) Florida had an intangible personal property tax on stocks, bonds, etc. Rich folks have a lot of them

Thanks to reader Doug Hoffer who turned out to be not only a better statistician but a better editor than the News Guy.

Who was trying to make the point that the average bloke (or blokette) could earn more money in Vermont than in most Southeastern states. That’s true, but comparing per capita income was not the best evidence to support the contention, because, as Hoffer said, “it ignores the (income) distribution” As he said, comparing median household income, family income, or hourly wage would have been better.

Then he asks, ” You said, “A case can be made, both economically and morally, for greater inequality. I can’t imagine how.”

So we’ll try to explain.

First of all, a case can be made for anything – tyranny, racism, and (as we have recently seen) torture. The question is, can a good case be made for any of it?

For those last three, no. Greater income inequality is a bit more complicated. Obviously we all accept some inequality. The company president earns more than the janitor, the foreman more than the laborer, the maitre d’ more than the busboy. A market economy has to provide incentives.

Over the last few decades, the “more’ that these bosses earn vis a vis their underlings has grown substantially. Too much, in the  view of some. But not everyone agrees. They claim the economy grows faster if entrepreneurs can earn more and keep more of what they earn.

As it happens, the economy has grown faster when incomes got more, rather than less, equitable – from the 40s through the 60s, and again in the 90s, when income inequality grew, but more slowly than it did in the 1980s.

But there’s also a moral argument for greater inequality, the argument that there is a connection between power, wealth, and virtue, that those who have more deserve more, and those who have less…don’t.

It’s a tough political argument because many more voters have less than more. Hence the diversionary tactic, claiming that the real purpose of inequality is economic growth. The point of that earlier post was to urge the anti-equality forces to stop pretending that, for instance,  Vermont’s tax rate was hurting the economy (it is not), and to come out of the closet, as it were, and make an honest case for more economic inequality.

Hmmm. Come out of the closet. Could supporting greater inequality be the policy position that dare not speak its name?

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).

Now that the Sunday Rutland Herald/Barre-Montpelier Times-Argus has placed Glen A. Wright’s letter of departure from Vermont into the mainstream conversation, those of us who choose not to follow him can have only one thing to say to him: Goodbye, and good luck.

Yes, that was ‘good luck’, not ‘good riddance.’ Just because Wright, who said his family has been in the state for six generations, no longer wants to be a Vermonter is no reason to wish him anything but the best. It’s a free country, and anyone may live wherever he or she chooses for any reason whatsoever.

Wright is leaving, he said, because “the tax burden in Vermont has become more than we are willing to bear. We can’t take it any more and are taking the only possible alternative: leaving Vermont.”

He and his wife, Rosemarie, are selling their house in South Hero and moving to Florida. Folks in South Hero say that the Wrights own a horse farm near Ocala, where they have spent the winter for years. Now it will be their official home.

The move does seem likely to lower their tax bills substantially. Florida has no personal income tax, and the Wrights would seem to have a lot of personal income. How much is uncertain, but according to South Hero Town Clerk Sharon Roy, the Wright’s home and 86.78-acres (“Tara North” in local lore) are assessed at $1.341,700, explaining the $12,000 property tax bill Wright mentioned in his open letter.

A prudent landholder would not own such a expensive piece of property unless he had an income well into six figures, and Wright, according to the newspaper, spent 37 years as a tax accountant. Fiscal prudence comes with the territory. On top of that, his property tax bill in Florida, now that, as a resident, he will be eligible for that state’s “homestead exemption,” will be more than $8,000 less than he was paying in South Hero (pictured above; not Wright’s home, just a scene).

The Wrights had been paying Vermont taxes for years, and those taxes haven’t shot up lately. So what straw broke the moose’s back? In his letter, he indicated that what drove him out of the state was the “recent legislative action reducing the state income-tax deduction, the estate-tax exemption reduction and increasing tax on capital gains (which)  will have a significant negative impact on us.”

Actually, these proposed increases on upper-income earners have not gone into effect, and might not, depending on what happens today with the budget impasse between Gov. Jim Douglas and the Legislature. But perhaps from Wright’s perspective, the very fact that these tax hikes are seriously contemplated was enough to convince him to move away.

Again, that’s his private decision, on which he should not be judged. In writing his open letter, though, he also entered the public policy discussion, and here he is on weaker ground.

Wright is making the case that Vermont’s relatively progressive tax system drives wealthy people out of the state. He doesn’t say why this is a problem for those who remain, but presumably (because this is the case others have made), he believes the exiting rich will take their money with them, leaving the state short of the investment it needs in order to prosper.

“The Legislature has dismissed the fact people leave Vermont for tax purposes because they had no specific evidence of the people leaving.” He wrote. “As a practicing accountant, I testified many times to legislative fiscal committees on tax matters, as did many other tax professionals. These committees refused to believe people were leaving Vermont because we professionals, bound by confidentiality, would not disclose names.”

Well, now he’s disclosing his own and his wife’s names, so we know of two people who are leaving because of high taxes. And proceeding on the assumption that Wright is an honorable fellow, he must know some others.

In other words, he has evidence.

Anecdotal evidence, but anecdotal evidence is not invalid if it is backed up by more objective, empirically testable, evidence.

In this case it is not.

More rich people live in Vermont now than ever before in its history, and their numbers keep going up, high taxes or no. In 2000, according to the official figures of the Department of Taxes, no one in the state made more than $1 million. In 2007 (the latest figures available), 531 Vermonters filed tax returns reporting they earned more than a million clams.

A 531 percent increase.

Well, that’s fooling with statistics. But the number of households reporting between $500,000 and a million also went up more than 25 percent, from 829 to 1,040. And where only 1,285 returns in 2000 were for incomes between $300,000 and $500,000, in 2007 there were 2,163 of them, a 68 percent increase.

OK, these are big percentage hikes on small bases. But check the figures. Vermont’s wealthy have increased in raw numbers, in percentage terms, and as a proportion of the entire population.

In short, for every Glen Wright who leaves Vermont because of the taxes, more than one person roughly as rich as Glen Wright moves into it.

Nor is this some Vermont aberration. Consider New Jersey, with tax rates comparable to Vermont. New Jersey has the largest percentage of millionaires in the country.

We’ll repeat that, to make sure it gets through. In high-tax, heavily-regulated New Jersey, a greater proportion of the people are millionaires than anywhere else in the country.

Almost surely meaning, that, not counting a few oil sheikdoms, it has the biggest proportion of millionaires of any identifiable society in the history of the world.

In other words, plenty of rich people have no problem living in high-tax states if…..

…well, if what?

Good question. Here are three possible answers;

First, as outlined by prize-winning economist Emmanuel Saez, wealthy people are getting a bigger-than-ever (since World War II) share of the total income in the country and paying a smaller percentage of it in taxes, which therefore recede in importance;

Second, some rich people like other things about where they live – the way it looks, the local ball clubs, the rivers and mountains, the theaters and music, the communal feeling, perhaps even the satisfaction that comes from living in a more equitable society. To them, the higher taxes are worth it.

But there’s an economic reason, too. Let’s go back to those Vermont tax numbers (though the same applies in New Jersey, Maryland, and other wealthy, high-tax states). The figures also show big increases among the affluent but not quite rich. Those earning between $125,000 and $150,000 rose by 75 percent. And there were 82 percent more returns reporting between $150,000 and $200,000.

For the most part, folks in this bracket don’t have enough spare cash to do a lot of investing. But they do a whole lot of consuming. They buy cars, appliances, clothing, furniture, skis, houses, land, accounting services (like Wright’s), theater tickets, divorces, lobster dinners, and more.

And you know what all that consumption attracts?

Investment. Big money from its residents and from others; you don’t have to live here to invest here.

But many people do both. The evidence is that Vermont is a good place to make money. That’s probably why rich people keeping moving in, and why non-rich Vermonters get rich. That’s why Vermont has experienced “a higher than average growth at the top of the income distribution,” in the words of a study by University of New Hampshire economists.

Generally speaking, he who makes more will end up with more, even if he pays more of it in taxes. That may not apply to Glen Wright, who seems to be retired, meaning his income would be essentially the same no matter where he lived. But it will apply to the 40-year old entrepreneur who (effectively) replaces him in Vermont.

But wouldn’t there be even more investment and faster growth if taxes were lower and all the Glen Wrights stayed, making their contributions to the state’s economy?

Maybe, but probably not. Because over the lat several years, Vermont, like most of the other high-tax states, has grown as much as its neighbors, including those with lower taxes.  Last month, Vermont was one of six states that actually added jobs. At any rate, growth depends on several factors, investment being but one of them, and usually not the main one.

There is more to be said on this subject. But today’s exercise has gone on long enough. Tomorrow’s post will deal with the drama in Montpelier, but hold these thoughts. We’ll return to Mr.\Wright and his letter later in the week.