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Taxes: 6. Vermont’s 2018 State Tax Bonanza

Following a small decline in tax revenues in fiscal year 2017, Vermont’s tax revenues shot up sharply in fiscal year 2018.  Total tax revenues were up 5.7%, or $ 173.9 million, of which $116.8 million came from increased income tax revenues. This article will explore why this happened.

To provide a basis for the discussion, the following table summarizes the year-over-year changes in key tax revenue streams.

                                     Vermont State Tax Revenues ($ millions)

Tax FY 2018 FY 2017 Change in $ Change in %
Personal & Corporate Income Tax 947.6 830.8 116.8 14.1%
Sales & Use Tax 397.1 376.1 21.0 5.6%
Meals & Rooms Tax 175.7 169.1 6.6 3.9%
Purchase & Use Tax 109.4 103.2 6.2 6.0%
Education Tax 1059.0 1049.4 9.6 0.9%
Other Taxes 550.3 536.4 13.9 2.6%
Total Taxes 3,239.1 3,065.2 173.9 5.7%

Source: Vermont Comprehensive Annual Financial Reports for Fiscal Years 2017 and 2018

As indicated in the table, pretty much every tax revenue stream went up in 2018, with income taxes leading the way.  Personal Income Taxes, at just over $830 million, were up about $77 million, or 10% of the increase.  Corporate Income Taxes, at approximately $108 million, were up over 25%.

Vermont Was Not Alone

The National Association of Budget Officers tracks state government revenue collections annually.  Fiscal year 2018 was a very good year, with 40 states (including Vermont) recording revenues above budget.  Across the country, state General Fund revenues collections were up 6.4%.  For all 50 states, Personal Income and Corporate Income Taxes were up 7.9% and 3.7%, respectively.  As noted above, Vermont experienced greater growth in income tax revenues.

The National Association of Budget Officers site three principal reasons for the growth in tax revenues, as follows:

Employment and Wage Growth: Across the country, there were more people working and higher wages in 2018.  In Vermont, the number of non-farm workers was stable, but wages were certainly up circa 4% on average.  Greater payrolls mean higher tax revenues.

High OneOff Earnings: The fiscal year ended June 30, 2018 was very good in the stock market. Interest rates also went up. As a result, interest, dividend and capital gains income were all up sharply.  This type of income, particularly capital gains, tends to be non-recurring.  Vermont residents probably experienced their fair share of these income gains.

Higher Oil & Gas Prices: For those states that have meaningful oil industries, higher oil prices means higher corporate profits and higher tax revenues.


Vermont’s Fiscal-Year 2018 Tax Experience

Many elected representatives in Vermont were surprised by the upside in 2018 tax revenues.  In July 2018, the Vermont Emergency Board published its Consensus Revenue Forecast Update for fiscal years 2019 and 2020.  In order to forecast future revenue, they needed first to understand what happened in 2018.  Here is the Vermont Emergency Board’s assessment:

  1. In general, “2018 receipts benefitted from a rare confluence of a relatively small number of large revenue events”.
  2. Federal tax law changes gave rise to Vermont tax revenue from corporate profits parked in offshore jurisdictions.
  3. There were a small number of exceptionally large capital gains.
  4. Only 30 discreet revenue events between Jan and June, 2018 gave rise to about $65mm of incremental tax revenue.

While the Vermont Emergency Board gave credit to the underlying strength of the economy, it basically believed that one-off events were largely responsible for the 2018 tax haul and remained cautious about future years.

Are Vermont’s Higher Tax Revenues Sustainable?

The one-off events that drove Vermont’s 2018 tax revenue increases must be continuing into fiscal year 2019.

The Vermont Department of Taxes provides a monthly revenue report that compares year-to-date revenues against both the budget and the prior year. As of April 2019, which is ten months into the 2019 fiscal year, total General Fund tax revenues were up 7.19%% over 2018.  Personal Income tax receipts were up $34.8 minion, or 4.8% and corporate tax collections were up $38.67 million, or just in excess of 50%.

There are, of course, 12 months in a year.  Future monthly tax collections could be lower or refunds could be higher.  As of April, however, Vermont’s 2019 tax revenues were looking fairly robust.

Effect of the Tax Cut and Jobs Act

Passed in December 2017, the Tax Cuts and Jobs Act was the biggest overhaul in the federal tax code since the 1980’s.  The impact this had on Vermont state taxes in fiscal year 2018 and will have in future years is difficult to estimate.

With respect to personal income tax, the Tax Cuts and Jobs Act increased the standard deduction and eliminated the personal exemptions for family members. The Vermont Department of Taxes estimated that this would have the effect of increasing personal income tax receipts by $30 million in fiscal year 2019.  Vermont decided to change its tax code in an effort to “neutralize” the impact of the new federal tax code, so the impact on state personal income taxes should be small.

The changes with respect to business and corporate taxes were many and very complex. The treatment of foreign income had large one-off impacts but also long term effects, the treatment of capital investments was changed and the rules around pass-through entities were greatly altered, to mention but a few of the new provisions. How all these federal tax code changes flow through to Vermont’s tax code is uncertain and the net effect on corporate tax receipts difficult to estimate.

So far, the hard data suggest both higher personal and corporate tax receipts in fiscal year 2018 and year-to-date 2019.  Some of this is clearly related to the Tax Cuts and Jobs Act, such as the treatment of foreign income. Much of it was related to the strength of the underlying economy and one-off business events.  The true impact of the Tax Cuts and Jobs Act on State of Vermont taxes will probably not be fully understood for a number of years.

Key Observations

The Sun Is Shining: They must be celebrating in Vermont’s Tax Department!  Revenues are coming in over the transom.  There was a budget surplus in 2018 and 2019 is looking bright.  What should Vermont do with all this money?  The next article in The Informed Vermonter will take a look at what the state government actually decided to do in 2018.


Related Articles

  1. Vermont’s Many Taxes Explained: https://theinformedvermonter.com/493-2-vermonts-many-taxes/
  2. How Do Vermont’s Taxes Compare To Other States: https://theinformedvermonter.com/487-2-comparative-taxes/


Revenues & Expenditures: 11. How Do Vermont’s Revenue Sources Compare To Other States?

As discussed in the prior article, state governments tend to spend their money on the same things, with only the amounts spent differing from one state to the next. State government revenue sources, on the other hand, can and do differ widely from one state to the next.

Some states have no personal income taxes or no sales tax, some states have very high royalty revenues from mining or oil extraction activities and some states have significant gambling revenues from casino operations.  However, the revenue sources of all states fall into four basic categories, as follows:

  1. Service Charges: State governments charge fees for a wide variety of activities, such as drivers licenses, vehicle registrations, hunting and fishing licenses, business licenses and the like.  The list tends to be similar from one state to the next with only the level of fees differing materially.
  2. Federal Grants: A large portion of all state government funding is provided by federal grants. In all cases, Medicaid is the largest federal grant, but there are a wide variety of federal grant programs and the total amount received by individual states differs widely.
  3. Misc./Other: This is a small component of funding and typically includes items like interest income on fund balances and tobacco litigation settlement proceeds.
  4. Tax Revenues: All states impose taxes, but the mix of taxes differs across states.


Vermont and the New England States

From a revenue perspective, all six New England states are reasonably similar. None have any meaningful coal, oil or gas production, so royalty revenues are zero in all cases (Oklahoma, for example, had $413mm of “Gross Production Taxes” in 2017).  Only Connecticut has any meaningful casino operations, and their gambling tax revenues remain quite small.  Three states (Vermont, New Hampshire and Maine) have state imposed property taxes and the remaining three states do not. Vermont is the only New England state to have fully centralized K-12 education spending and therefore has the largest state property tax.

These differences aside, a comparison of funding sources for Vermont and the other New England states is useful and informative.

Funding Sources as a % of Total State Government Revenues (%)

Service Charges 13.2 30.9 14.0 21.3 25.2 18.9 20.5
Grants 32.9 34.1 35.5 35.7 23.2 27.3 32.3
Misc. 1.2 1.1 2.3 1.7 2.4 2.4 1.8
Taxes 52.7 33.9 48.2 41.3 44.2 51.4 45.3

Source: Fiscal year 2018 Comprehensive Annual Financial Reports for VT, NH, Maine and RI. Fiscal year 2017 Comprehensive Annual Financial Reports for MASS and CONN.

In the chart above, Vermont appears to be comparatively low in Service Charges, comparatively high in tax revenues and pretty much on par with respect to federal grants.  However, Vermont’s centralized state property tax skews the results relative to these other states.  If you remove property taxes from the equation, Vermont would be 16.0% Service Charges, 39.8% Grants and 42.8% Tax Revenues.

After adjusting Vermont for its unique centralized property tax, it appears Vermont has a very high level of grants, modestly lower Service Charges and modestly higher taxes than the average New England state.  Examining some of these revenues sources on a per capita basis confirms this profile, as follows:

       Selected Per Capita State Government Revenue Sources ($/head)

State Per Capita Grants Per Capita Personal Income Tax Per Capita Service Charges
Vermont 3,235.80 1,327.60 1,298.10
New Hampshire 1,833.80 000 1,662.00
Maine 2,250.90 1,217.30 887.80
Rhode Island 2,832.00 1,269.90 1,686.70
Massachusetts 2,376.30 2,124.80 2,123.20
Connecticut 2,407.30 2,257.50 1,657.90

Source: Fiscal year 2018 Comprehensive Annual Financial Reports for VT, NH, Maine and RI. Fiscal year 2017 Comprehensive Annual Financial Reports for MASS and Conn.  Population estimates from US Census Bureau.

Vermont’s per capita Service Charges, at $1,289.10, are lower than all but one other New England State.  Per capita income tax revenue is a bit higher than Maine and Rhode Island, but materially lower than Massachusetts and Connecticut.

Where Vermont really stands out is in federal grants.  Vermont’s per capita federal grants are a whopping 38% higher than the average of the five other New England states and 14% higher than the next highest state, Rhode Island.  If Vermont’s per capita federal grants were reduced to the average of the five other states, it would loose $561 million of revenue!

Key Observations

Quiet Please: Someone in Washington must be doing a good job.  Don’t tell anyone in the federal government about Vermont’s federal grants!!

Related Articles

1. Vermont’s State Government Service Revenues: https://theinformedvermonter.com/489-2-vt-service-revenues/

2. Vermont’s 2017 Federal Grants: https://theinformedvermonter.com/671-2/




Revenues & Expenditures: 10. How Did Vermont’s Expenditures Compare To Other States in 2018?

Does the state government of Vermont spend too much money, not enough or just the right amount?  Is all this money being spent on the right things?

These are, of course, quite difficult questions to answer. Differing political views aside, what benchmarks are available to measure the efficacy of Vermont’s spending decisions?

One useful benchmark is to compare Vermont to the other states in the country, all of which pretty much spend their taxpayers’ money on the same set of government services.

Comparing Vermont to Alabama or Oklahoma is probably not going to be a particularly useful exercise.  However, a comparison to the USA as a whole, New England as a whole and the neighboring state of New Hampshire is more useful and informative.  It won’t answer the questions posed above, but it might help identify areas where there is cause for further evaluation.

In any comparison exercise, it’s important to compare apple to apples.  In the case of Vermont, K-12 education is an orange that needs to be treated separately.  Vermont fully centralizes K-12 education spending at the state government level and the vast majority of other states rely heavily on local taxes to fund education.  To paint as accurate a picture as possible, this article will treat K-12 education spending separately,

State Spending Excluding K-12 Education

Each year, the National Association of State Budget Officers publishes the State Expenditure Report, which compares the spending of all 50 states.  The data in this annual report is derived from state budgets and provided directly by the states.  This article has converted this spending information to per capita amounts using Census Bureau 2018 population estimates.

Fiscal Year 2018 Comparative State Government Per Capita Expenditures ($/person)

Category Vermont New Hampshire New England USA Vt. vs. New England Vt. vs. USA
Total Expenditures Excluding K-12 Education 6,081.1 3,599.1 6,918.3 4,993.0 (12.1%) +21.8%
Medicaid 2,577.9 1,605.7 2,293.1 1,843.6 +12.4% +39.8%
Transport 910.1 411.4 690.2 495.5 +31.9% +83.7%
Capital Expenditures 563.1 312.6 620.8 331.1 (9.3%) +70.1%
Corrections 249.1 98.8 191.5 191.1 +30.1% +30.4%
Public Assistance 146.9 67.8 109.7 78.3 +33.9% +87.6%
Higher Education 161.3 102.5 412.6 625.4 (60.9%) (74.2%)
All Other 2056.5 1313.0 3221.2 1,759.1 (36.2%) 16.9%

Source: National Association of State Budget Officers State Expenditure Report 2016-2018.  The 2018 population estimates are from the US Census Bureau.

Vermont’s state government per capita expenditures (excluding K-12 education) were 12.1% below the average of all New England states in 2018.  Massachusetts, Rhode Island and Connecticut all had higher expenditures while both Maine and New Hampshire were materially lower.  The highest was Connecticut at $8,009 and the lowest New Hampshire at $3,599.

With the exception of New Hampshire, all the New England states had expenditures exceeding the national average.  As indicated in the table above, Vermont’s total per capita expenditures (excluding K-12 education) were 21.8% higher than the national average in 2018.

In several categories, Vermont exceeds both New England and the US averages.  In Medicaid, Vermont’s per capital expenditures are almost 40% higher than the national average and 12 % above New England. Vermont’s Public Assistance spending is also very high, exceeding the national average by 87.6% and New England by 33.9%. Transportation and Corrections expenditure were also very high on a comparative basis.

Vermont also ranks at the low end of expenditures in a few areas. Higher Education spending by the state of Vermont is very low, trailing New England by 60.9% and the USA average by 74.2%.  Capital expenditures in 2018 for infrastructure, such as highways, bridges, machinery and equipment, were also comparatively low in Vermont compared to the average for New England.

K-12 Education Expenditures

The US Census Bureau tracks K -12 education spending on a comparative basis for all 50 states.  Their data includes all sources of funding, including local, state and federal government sources.  The most recent Census Bureau Education Spending Survey published in 2018 covers actual education expenditures for fiscal year 2016.

K-12 education spending for Vermont, the other New England States and the USA as a whole are outlined below.

Total Per Pupil Spending Fiscal Year 2016 ($)

Region Spending Per Student ($)
USA $11,762
Maine $13,278
New Hampshire $15,340
Rhode Island $15,532
Massachusetts $15,593
Vermont $17,873
Connecticut $18,958

Source: US Census Bureau Survey of Education Spending

As clearly outlined above, Vermont’s K-12 education expenditures are very high. First, they exceed the national average by a whopping 52%.  In New England, only Connecticut has higher education expenditures than Vermont. Massachusetts, the third most costly state, has per pupil costs 15% below Vermont’s.


Vermont is a high cost state.  In the two areas that account for some 65% of Vermont’s total state government spending, K-12 education and Medicaid, Vermont’s expenditures are materially in excess of both the national average and most of its neighboring New England states.

The Informed Vermonter will provide more detailed updates on both Medicaid spending and education costs in Vermont in separate articles. These are really the two most important drivers of Vermont government spending and resulting taxation and they deserve a lot of attention.


Related Articles

  1. How Do Vermont’s Expenditures Compare To Other States? https://theinformedvermonter.com/485-2-comparative-expenditures/




Revenues & Expenditures: 9. Vermont’s Fiscal-Year 2018 Summary

In the fiscal year ended June 30, 2018, the government of the State of Vermont had total audited expenditures of $6.1billion, up $156.5 million over 2017. This was a watershed year for Vermont: state revenues and expenses exceeded $6.0 billion for the first time.

This is the third annual update provided by The Informed Vermonter and, like all the others, it is based on Vermont’s Comprehensive Annual Financial Report (“CAFR”). The CAFR provides an independent, audited and accurate overview of the State’s expenses, revenues, assets and liabilities.

For fiscal year 2018, the State changed its auditor from KPMG, a “Big 4” accounting firm, to CliftonLarsonAllen, the number eight firm in the USA.  Changing auditors periodically means there is a fresh set of eyes looking at the state’s financial accounts, which is probably a good thing.  Hopefully, the state also managed to reduce its audit costs with this switch.

The State’s FY 2018 revenues and expenses are outlined below, beginning with revenues.

Revenues Fiscal Year Ended June 30, 2018

Revenue Source Revenue ($mm) 1-Year Change (%) 5-Year Change (%)
Service Fees 813.2 0.6 13.3
Federal Grants 2026.2 0.4 2.8
Misc. Revenues 73.8 65.7 76.6
Total Non-Tax Revenues 2913.6 1.5 6.7%
Income Tax 947.6 14.1 27.4
Sales & Use Tax 397.1 5.5 11.7
Gross Property Tax Education 1231.3 1.0 10.2
-Less Income Sensitivity (172.1) 1.1 20.6
Net Property Tax Education 1059.0 0.9 8.7
Meals & Rooms Tax 175.7 3.9 22.4
Other Taxes 659.5 3.1 5.6
Total Tax Revenues 3,238.9 5.7 13.9
Total Revenues 6,152.5 3.7 10.4

Source: Vermont Comprehensive Annual Financial Report Fiscal Years 2018 and 2014

Expenditures Fiscal Year Ended June 30, 2018

Department Expenditures ($mm) 1-Year Change (%) 5-Year Change (%)
General Government 158.6 15.0 13.4
Protection to Persons & Property 407.3 5.8 18.3
Human Services 2,471.7 (1.5) 8.8
Labor 29.8 (6.3) (2.6)
General Education 2,092.4 4.9 16.1
Natural Resources 135.0 20.3 27.8
Commerce & Community Development 43.4 (10.1) (1.4)
Transportation 462.0 6.7 8.6
Interest 19.0 11.1 68.1
Unemployment Compensation 64.1 (6.8) (27.0)
Lottery Commission 105.5 8.9 32.0
Liquor Control 64.2 5.8 16.3
Other Expenses 4.5 (6.3) (37.5)
Total Expenditures 6057.5 2.7 12.1

Source: Vermont Comprehensive Annual Financial Report Fiscal Year 2018 and 2014

As discussed by The Informed Vermonter in prior articles, the revenues and expenditures outlined above are prepared on an accrual accounting basis and do not reflect the actual cash flowing in and out of the State government.  The charts above include non-cash items such as accrued but unpaid expenses, uncollected revenues, non-cash pension adjustments and non-cash depreciation expense.  Also, major balance sheet items like capital expenditures, changes in debt and changes in working capital are excluded.

The excess of FY 2018 revenues over expenditures suggests a surplus of $95 million. However, after making adjustments for the cash flow items outlined above (and excluding changes in debt), there appears to be an annual deficit of almost $7 million on a cash flow basis.

Estimated Fiscal-Year 2018 Cash Flow

Cash Flow Item Amount ($mm)
Excess of Revenues over Expenditures 95.0
Non-Cash Depreciation Expense 186.7
Other Non-Cash Expenditures, principally pension related 188.1
Increase in Net Debt 57.2
Estimated Cash Inflows After Cash Expenditures 527.0
Capital Expenditures Net of Asset Dispositions (295.5)
Increase in Net Working Capital (180.7)
Estimated Other Cash Outflows (476.6)
Net Cash Flow 50.4

Source: Derived from information in the Vermont Comprehensive Financial Reports for Fiscal Years 2018 and 2017

As clearly illustrated in the above chart, had the State not increased its debt by $57.2 million in fiscal year 2018, the estimated net cash flow of $50.4 million would have been a deficit of ($6.8) million.  In the context of over $6 billion in total expenditures, this represents only a 0.1% cash shortfall.  Given the difficulty of predicting the State’s various expenses and revenue streams in the budget process, this looks to be a fairly well managed outcome.

Key Observations

Total Expenditures Increased with Inflation: Total audited expenditures were up 2.7% in fiscal year 2018 compared to a 2.9% increase in the US Consumer Price Index over the same 12-month period.  However, most of the increase occurred in a single department, as discussed below.

Tax Revenues Were Way Up:  Having declined 1.8% in fiscal year 2017, Vermont’s total tax revenues increased 5.7% in fiscal year 2018.  The largest increase was in Income Taxes, which were up a whopping 14.1% in fiscal year 2018.  The Informed Vermonter will cover the reasons behind this increase in a separate article, including the impact of the federal Tax Cut and Jobs Act of 2017.

A Tale of Two Departments:  Together, Human Services and General Education accounted for 75% of total expenditures in fiscal year 2018.  Following years of rapid growth in Medicaid costs, total Human Services expenditures actually declined by 1.5% in fiscal year 2018, or $36 million. Unfortunately, General Education expenditures increased 4.9%, or $102.5 million.  General Education accounts for over 65% of the total increase in annual expenditures.

Related Articles

  1. Vermont 2017 Fiscal Summary https://theinformedvermonter.com/483-2-fiscal-2017-cafr/
  2. Vermont 2016 Fiscal Summary https://theinformedvermonter.com/revenue-expenditures-vermonts-fiscal-2016-summary/






Key Facts & Figures: 12. Minimum Wage Considerations

Who is the biggest beneficiary of a minimum wage boost?

Vermont passed new minimum wage legislation (Act 176) in 2014.  With the federal minimum wage set at $7.50/hour, Vermont’s minimum wage was $10.50/hour as of January 1, 2018.  The Vermont minimum wage increases annually by the Consumer Price Index, subject to a 5% cap.  It is now $10.78/hour.

There remains a fair amount of political pressure to increase the minimum wage in Vermont to $15.00/hour. There are very real philosophical, economic and commercial issues related to any increase in the minimum wage.  This article will not tackle any of these issues.  Instead, The Informed Vermonter will take a detailed look at the impact an increase in the minimum wage would have on after-tax incomes and access to health care programs.

According to the Vermont Department of Labor, 10% of Vermont’s work force earned less than $21,746 per year in 2016.  With the minimum wage now at $10.78/hour, a person working 40 hours a week for 50 weeks earns $21,560.  Accordingly, it looks like about 10%, or some 30,000 Vermonters, would be affected by any change in the minimum wage. Given the large number of people, careful consideration should be given to the knock-on affect of increased minimum wages on taxes and existing government programs.


This article will try to assess the impact of an increase in the minimum wage to $15.00/hour on the wage earner.

There are, of course, an almost unlimited number of situations and combinations that would affect the financial condition of minimum wage earners in Vermont.  To keep things simple, all the minimum wage earners that this article refers to are assumed to work 40 hours per week for 50 weeks per year with no other employee benefits.  Also, there are no other sources of income, such as interest or dividends.  Last, this article will look at only three basic family units, as follows:

  1. Single Person: Now earns $21,560 per year, which would increase to $30,000 per year with a $15.00/hour minimum wage.
  2. Single Parent: Same salary profile as the Single Person, but with one dependent child.
  3. Family of Four: Same salary profile as the Single Person, but with two working parents and two dependent children.

The Informed Vermonter has estimated both the federal and Vermont state tax liabilities assuming that all the family units are taking the maximum standard deductions available.

Taxes and After-Tax Income

An increase in the minimum wage from $10.78 to $15.00 would increase the annual wages of the working adults in our family units from $21,560 to $30,000.  Given federal and state tax codes, not all of this money would accrue to the benefit of the wage earner.

The Single Person would experience an increase in both federal and state taxes.   With the minimum wage increased to $15.00/hour, the Single Person would have their combined federal and state income tax bill increase from $1,341 to $2,638. Instead of hourly wages growing from $10.78 to 15.00, actual after-tax wages would grow from $10.11 to $13.68. Basically, $1,297 of the wage boost goes to the government as higher taxes.

The Single Parent is eligible for both the Earned Income Tax Credit and Child Tax Credit with the minimum wage set at $10.78/hour and receives refundable tax credits as a result. For the Single Parent, an increase in the minimum wage to $15.00/hour would reduce annual refundable tax credits from $5,202 to $3,073, representing a tax cost of $2,129.

The Family of Four is also eligible for both the Earned Income and Child Tax Credits. An increase in the minimum wage to $15.00 would result in moving from a net tax credit recipient of $2,367 to a net tax payer of $1,052, a $3,419 increase representing about 20% of the combined pay increase of the two parents.

The federal government and Vermont also have tax credits for eligible childcare costs. These are tied to income levels.  Unlike the Child Tax Credit, which is partially refundable, childcare tax credits are not refundable.  The value of these credits would decline with an increase in the minimum wage. However, most minimum wage earners would have no meaningful tax liability to offset with childcare credits.

It is likely that many minimum wage earners are renters and all would be eligible for Vermont’s rent rebate program.   The rebate is based on the difference between actual rent paid and “Allowable Rent” based on income levels.  An increase in the minimum wage to $15.00/hour would increase both the income and the portion of income considered “Allowable”.  So, rent rebates will decrease with an increase in the minimum wage.

In summary, the existing US and Vermont State tax codes will take a big bite out of the gross pay increases associated with an increase in the minimum wage. However, in all the cases examined above, everyone’s net after-tax pay does increase so hard working minimum wage earners would be better off.

There are, unfortunately, factors other than taxes to consider.


With increased wages come increased health insurance costs.  Here is what happens to our assumed family units above, based on the Vermont Health Connect Plan Comparison Tool 2019.

Single Person: At $10.78 hour, Single Person qualifies for a $550 monthly premium subsidy resulting in a monthly out of pocket cost in the $50-$70 per month range and a maximum out of pocket medical cost of $1,250 to $2,000, depending the actual plan being used. At $15.00/hour, the monthly subsidy decreases to $453/month, the monthly out of pocket increases to $150 to $200 and the capped out of pocket medical cost grows to $3,000 to $5,000.  In summary, cash premium costs increase by $1,200 to $1,500 per year and the at-risk annual deductible increases by $1,750 to $3,000.  Maximum annual health care costs increase by $3,000 to $4,500, representing 35% to 50% of the minimum wage increase.

Single Parent: At $10.78 per hour, Single Parent and child both qualify for free health care.  At $15.00/hour, the adult no longer qualifies for free Medicaid.  Instead, coverage comes with a monthly premium subsidy of $517 resulting in a plan with $80-$125/month out of pocket costs and a capped medical expense deductible in the $1,200 to $1,500 range.  The total annual cost of Single Parent’s adult health care coverage has increased from zero to $2,200 to $ 3,000.

Family of Four: At $10.78 per hour, Family of Four has free coverage for the children and qualifies for a subsidy of $1,111 for the two adults.  The monthly out of pocket cost is in the $85 to $150 range with a capped medical expense deductible in the $3,000 to $4,500 range.  At $15.00/hour, the children continue to qualify of free coverage, but the subsidies for the adults decrease to $920/month, the out of pocket premium goes to $275-$350 and the maximum medical deductible increases to the $6,500 to $10,000 range, depending on the specific plan being purchased.


The table below summarizes the costs incurred by workers by way of in increase in the minimum wage.

                                        Where The Money Goes ($/year)

  Single Person Single Parent Family of Four
Gross Wage Increase 8,440 8,440 16,880
Increased Tax or Reduced Refundable Tax Credits (1,297) (2,129) (3,419)
Increase in Monthly Health Insurance Premiums (1,200) (1,200) (2,500)
Increase in Maximum Health Care Deductible (1,500) (1,500) (3,500)
Total Increased Costs (3,997) (4,829) (9,419)
Costs as % Total Wage Increase 47% 57% 56%
Net Wage Increase 4,443 3,611 7,461


Key Observations

Big Beneficiary: It looks like a big slice of any increase in Vermont’s minimum wage will accrue to the state and federal government. The increase in taxes (or reduction in tax credits) flow mostly to the federal government and the reduction in Medicaid subsidies is shared 60/40 between the federal and state government.  The reduction in rent rebates, which is not included in the above analysis, would accrue entirely to the state government.

Its Hard To Get Ahead: An increase in the minimum wage to $15.00/hour looks like a $4.22/hour raise.  After increased tax and health insurance costs, it’s more like a range of $1.80/hour to $2.20/hour.  The hard working Vermonter is better off, but not by so much.

Key Facts & Figures: 11. Vermont Wages and Wage Growth

About 309,000 Vermonters work as employees for some entity in the private sector or government.  The salary or wage they earn is one of the most important factors determining the quality of the lives they lead.  This article provides a detailed assessment of prevailing wages and wage growth in Vermont.

The information below is from the Vermont Department of Labor and/or the US Bureau of Labor Statistics.  Inflation data is from the Federal Reserve Bank of St. Louis.

Historical Wage Growth

 From 1997 to 2007, average wages in Vermont grew at a compound annual growth rate of 3.8%, reaching $36,323 in 2007.  During this same period, the average inflation rate, as measured by the Consumer Price Index, was 2.5%.  Wages were growing at a much faster pace than inflation, resulting in attractive growth of real incomes and purchasing power.  This was a pretty good decade.

Following the financial crisis of 2008, wage growth in Vermont slowed.  From 2007 to 2016, the compound annual growth rate of wages was only 2.2%, with average Vermont wages reaching $44,126 by 2016. The average inflation rate during this period was 1.7%.  The difference between income growth and inflation rates narrowed considerably, so the growth of real income was greatly reduced.  During this decade, people were working just as hard, but their purchasing power wasn’t growing very fast.  This decade didn’t feel so good.

Vermont vs. USA

 Average wages in Vermont have been below average US wages for a long time.  In 2007, Vermont’s average wage of $36,323 was $8,039 less than the US average wage of $44,362.  By 2016, this gap had widened to $9,389, when average US wages were $53,515 compared to Vermont at $44,126. Basically, it took Vermont nine years to catch up to 2007 US average wages!

In New England, only Maine has a lower average wage than Vermont.  All the other New England states have higher average wage levels.

Current Wage Trends

 Since 2016, wage growth in Vermont has accelerated nicely.  From 2016 to 2017, average wage growth was 2.5%, reaching $46,126. In the first quarter of 2018, this growth rate increased to 3.0% and in the second quarter reached 4.1%. The most recent data covering the third quarter showed year-over-year growth of 2.7%.

Vermonters must be welcoming this return to meaningful real income growth.

Regional Differences

 Vermont may be a small state, but average wage levels vary widely on a county- by-county basis.  Indeed, the average wages on the top earning county exceed the lowest county by 34%. The table below shows 2017 average wages by county, ranked from highest to lowest.

                                            2017 Average Wages ($)

County Average Wage
Chittenden 52,416
Washington 50,336
Addison 45,949
Franklin 45,806
Windsor 44,586
Rutland 42,751
Bennington 41,785
Windham 41,053
Caledonia 39,735
Orange 39,556
Lamoille 38,520
Orleans 36,574
Essex 36,327
Grand Isle 34,620
Vermont Average 46,186

Source: Vermont Department of Labor, Economic and Labor Market Information

Wages and Employment

Income and wages also differs depending on who the employer is.  The Vermont Department of Labor tracks average wages for every type of job and profession you could think of.  Looking at all these professions is well beyond the scope of this article.  However, all employment falls under four big categories: private ownership, federal government, state government and local government.  A quick summary of these major categories is quite interesting, as follows:

2017 Average Wage by Employment Sector ($)

Sector Average Wage % Civilian Employment
Private Ownership 45,207 82.9%
Federal Government 74,992 2.2%
State Government 57,779 5.3%
Local Government 41,513 9.6%
Vermont Average 46,186 100%

Source: Vermont Department of Labor, Economic and Labor Market Information


Vermont would appear to be a low wage state.  The average Vermont wage is 17% below the US average.  No single county in Vermont has an average wage as high as the US average and six Vermont counties have average wages 25% to 37% below the US average.

More recently, the news has been more encouraging.  The overall economy continues to grow, Vermont’s labor market is tight and wages are now growing at the fastest pace in over ten years.  Long may this last!

Related Articles

  1. Vermont’s Wage and Employment Profile: https://theinformedvermonter.com/key-facts-figures-vermonts-wage-employment-profile/



Key Facts & Figures: 10. Vermont’s Rental Housing Market

Approximately one third of Vermont’s housing units are rentals, so many Vermonters are tenants as opposed to homeowners.  This article will take a detailed look at prevailing market rent levels in Vermont and how they’ve changed over the last decade.

By way of background, the previous three Informed Vermonter articles reviewed house prices, property tax developments and underlying homeowner costs.  In summary, house prices in Vermont have been stagnant for a decade and, in most of the geographic areas of Vermont, are lower today than they were in 2007/2008.

Over this same period, Vermont’s property tax rates increased by 29% on average.  Other homeowner costs, however, were greatly reduced.  Mortgage interest rates declined by almost 50% and fuel oil by 30%. On balance, total annual homeowner costs were probably quite stable over the last decade.

Vermont’s landlords would have experienced all the housing market developments summarized above. So, in the context of these underlying market trends, what happened to rent levels?

Vermont Rent Levels

Each year the US Department of Housing and Urban Development (“HUD”) surveys Vermont’s rental market and determines the Fair Market Rents for purposes of the HUD Section 8 Housing Choice Voucher Program.  These are the rents private landlords are permitted to charge if they have tenants qualified for HUD Section 8 subsidies.

The HUD authorized fair market rents for fiscal year 2018 are summarized below, by county.

FY 2018 Fair Market Rent HUD Section 8 ($/month)

County 0 Bed 1 Bed 2 Bed 3 Bed 4 Bed
Addison 784 870 1,021 1,315 1,580
Bennington 850 874 1,004 1,362 1,367
Caledonia 697 702 903 1,132 1,230
Chittenden & Grand Isle & Franklin 920 1,121 1,442 1,921 2,025
Essex 609 623 794 995 1,081
Lamoille 728 844 1,031 1,270 1,658
Orange 759 764 977 1,254 1,367
Orleans 601 667 791 992 1,119
Rutland 755 772 929 1,213 1,377
Washington 803 808 1,064 1,338 1,585
Windham 722 835 1,051 1,318 1,585
Windsor 759 882 1,074 1,467 1,732

Source: HUD, Fair Market Rent for HUD Section 8 Housing Choice Voucher Program, FY 2018

The table below shows how much rents in Vermont have increased since 2008.

Compound Annual Growth Rate 2008-2018: Rent for 2-Bedroom Housing Unit

County Growth Rate
Addison 2.32%
Bennington 2.50%
Caledonia 3.08%
Chittenden & Grand Isle & Franklin 3.26%
Essex 1.17%
Lamoille 3.06%
Orange 2.72%
Orleans 2.93%
Rutland 2.33%
Washington 3.07%
Windham 2.00%
Windsor 3.12%

Source: Calculated from HUD, Fair Market Rent for HUD Section 8 Housing Choice Voucher Program, FY 2018 & FY 2008

The Vermont Housing Puzzle

On average, rents in Vermont have gone up in excess of 2.5% per year since 2008. During this same period, the US Consumer Price Index increased less than 2% per year, so rent increases in Vermont have been well in excess of underlying inflation.

As discussed in an earlier article, average house prices in all but four counties of Vermont are lower today than they were in 2008.  In an environment of low inflation and declining house prices, how is it that rents steadily increase?

Perhaps the demand for rental housing is relatively high compared to the supply. There is evidence this may be the case in Vermont’s vacancy rates.  According to the Federal Reserve Bank of St. Louis Economic Data, the vacancy rate for Vermont rental properties in 2017 was only 3.6%.  Anyone looking for a rental is limited to only 3.6% of the rental housing stock at any point in time.  For the US as a whole, the vacancy rate was double Vermont’s at 7.2%.

Building permits also suggest a tight rental housing market.  The US Census Bureau tracks total housing units and building permits.  Looking at the US as a whole, new building permits were 0.9% of the total number of housing units in 2017.  In Vermont, this ratio was only 0.5%, almost 45% lower.

It would appear that the combination of low vacancy rates with low growth in new housing construction contributes to a landlord friendly rental market in Vermont.




Key Facts & Figures: 9. Vermont Housing Costs

For most people, housing costs are the largest expense they bear.  This article will take a detailed look at Vermont’s housing costs for homeowners. The next article will take a look at Vermont’s rental market.

The US Census Bureau keeps track of housing costs.  “Selected Monthly Owner Costs” include mortgage payments, property taxes, home insurance, utilities (electric, gas, water & sewer) and fuel. As of 2016, the Census Bureau’s 5-year estimate of Selected Monthly Homeowner Costs for Vermont was $646 excluding a mortgage and $1,533 with the mortgage included.  For the US as a whole, these numbers were lower at $462 and        $1,491, respectively.  A more detailed look at the key components of housing costs is provided below.

Property Taxes

As discussed in the prior article, property tax rates in Vermont increased by 29% over the ten-year period ended in 2017.  In 2017, the average effective tax rate for a homestead residence was 2.08%. For a $200,000 home, this means an annual tax bill of $4,160, representing an increase of $940 since 2008.

Mortgage Payments

The one bright spot of the Great Recession has been historically low interest rates. According to the Federal Reserve Bank of St. Louis, average 30-year mortgage rates declined from 6.24% in 2008 to a low of 3.32% in 2012, representing a whopping 47% decline. Mortgage rates remained in the 3.5% area for several years, but have begun to increase over the last 18 months. As of November 2018, the average 30-year mortgage rate was up to 4.81%, still well below 2008 levels.

For many Vermonters who bought homes or refinanced mortgages after 2008 the reduction in mortgage interest rates would have helped to offset the increase in property taxes.

Home Insurance

Vermont has some of the lowest home insurance rates in the country. It would appear that the risk of hurricanes, tornadoes, fires and floods is less than most other states.  According to Insurance.Com, the average annual cost to insure a $200,000 dwelling with a $1,000 deductible and $100,000 of liability coverage is $589.  This compares to the US average of $1,228.

The cost of home insurance in Vermont appears to have been quite stable over the years.  The author’s home insurance costs have increased only 0.58% per year over the last ten years.

Home Heating and Electricity

Given long and cold winters, heating costs must be a factor in Vermont’s higher Selected Monthly Owner Costs.  Luckily, many fuel costs have trended down in price over the last ten years, as the chart below illustrates.

Vermont Fuel Costs ($/unit)

Fuel January 2008 January 2016 November 2018
Number 2 Fuel Oil 3.30 2.01 3.02
Propane 2.96 2.49 2.70
Natural Gas 1.71 1.39 1.81
Wood Cord 180 227 NA
Electricity 0.13 0.15 0.18

Source: Department of Public Service, Vermont Fuel Price Report.  The November 2018 Natural Gas and Electricity prices are from Vermont Gas and Green Mountain Power, respectively

All the petroleum related fuels experienced sharp price declines through to 2016: as much as 39% in the case of fuel oil.  Wood and electricity prices increased at a steady pace over the period. Since 2016, fuel prices have begun to move upward and are now in line with 2008 levels once again.

Very recently, the Vermont State legislature has voted to double heating fuel taxes to fund an expanded weatherization program. The majority supporting this measure was not particularly strong, so it remains unclear if this legislation will ultimately be enacted.

Water & Sewer Costs

Vermonters fall in two camps when it comes to water and sewer.  Many live outside of municipal water systems and have their own wells or springs and septic systems. In the absence of extraordinary problems, their annual operating costs for water and sewer will be quite modest.

For those Vermonters living within municipal systems, the annual cost of water and sewer varies widely and can be quite expensive.  In a 2016 report prepared for the Vermont Legislature, the average monthly cost of municipal water and sewer charges in Vermont was estimated to be $165.  The range of costs was very wide:  some towns were below $80 and some above $200.  This report was based on 2015 rates, so these costs have all likely increased in the interim.

Total Housing Costs

Using the information provided above, the table below estimates the total housing costs for a home valued at $200,000 with oil heat:

                              Estimated Housing Costs in Vermont

Cost Assumptions Annual Cost ($) Monthly cost ($) Information Source
Property Tax Average rate of 2.08% 4,160 347 Dept. of Taxes
Home Insurance Average cost for a $200,000 dwelling 589 49 Insurance.Com
Electricity Average monthly bill in Vermont 1,152 96 US Energy Info Agency
Fuel Oil Vermont average use of 700 gallons @ $3.02 2,114 176 Energy Co-Op Vermont
Subtotal 8,015 668
Water & Sewer Average monthly cost of $165 1,980 165 Legislative Report
Subtotal 9,995 833
Mortgage $160,000 30-year @ 3.75% 8,974 748 Informed Vermonter assumption
  Total 18,969 1,581  


The actual costs incurred by individual homeowners will no doubt vary widely from those in the chart above.  However, these estimated average costs are very much in line with the US Census Bureau estimates outlined at the beginning of this article.

There are, of course, other costs faced by homeowners.  As a rule of thumb, repair and maintenance costs are estimated to be 1% of the home value annually.  This alone would add $2,000 to the estimate above.  There are also lawns, gardens, lawnmowers, snow blowers, plows, termites and cluster flies that all need to be added to the equation.


According to the US Census Bureau, the median home value in Vermont is $218,900 and the median household income is $56,104.  Excluding the cost of a mortgage, and depending on a home’s water supply, the annual cost of home ownership looks to be somewhere between 14% and 18% of median household income.  If the cost of a mortgage in included, which would be the case for most homeowners, the total cost of home ownership is in the range of 30% to 34% of median household income.


Key Facts & Figures: 8. Vermont’s Housing Market/Property Taxes

Vermont and its towns rely on property taxes to i) provide for many of the operating and maintenance costs of municipalities, and ii) fund the bulk of K-12 education expenditures.

Unfortunately, the costs to run a town and provide education are not strongly correlated to the value of property.

As discussed in the previous article, during the ten-year period ended in 2017, Vermont’s property values declined.  According to the Vermont Department of Taxes, seventeen towns conducted property reappraisals in 2017.  In eleven of these towns, Grand List values declined.

One consistent measure of Vermont’s aggregate property value is the “Equalized Education Property Value” calculated annually by the Department of Taxes.  This is based on the Grand List values of municipalities, subject to certain equalizing adjustments, and is intended to mirror market values.  The chart below shows the total Equalized Education Property Value for the last ten years.

Equalized Education Property Value ($ Billions)

Year Vermont Equalized Education Property Value
2017 82.4
2016 81.0
2015 79.9
2014 78.8
2013 78.1
2012 78.5
2011 79.6
2010 81.3
2009 82.6
2008 80.9

Source: Vermont Department of Taxes, Annual Report Based on 2017 Grand List Data, January 11, 2018

The decline in property values for tax purposes through 2013 and subsequent modest recovery track the decline in market values discussed in the previous article.  The shift in aggregate property tax values was less volatile than the change in market prices as Vermont experienced new construction that added to the housing stock throughout this period.  Taking stock of both market price declines and new construction, Vermont’s property tax base was only 1.85% higher in 2017 than it was in 2008.

While property values were declining, the costs funded by property taxes were moving in the other direction.  As reported by the Department of Taxes, education spending went from $1.11 billion in 2008 to 1.35 billion in 2017.  Municipal tax receipts grew from $368 million in 2008 to $496 million in 2017.

With flat to declining property values and rising costs, something had to give.  As outlined in the chart below, property tax rates have increased steadily over the last ten years to fill the gaps.

Total Effective Property Tax Rate (%)

Year Homestead Effective Tax Rate Non-Residential Effective Tax Rate
2017 2.08 2.10
2016 2.10 2.11
2015 2.08 2.09
2014 2.04 2.05
2013 1.92 1.96
2012 1.84 1.90
2011 1.76 1.86
2010 1.71 1.83
2009 1.65 1.77
2008 1.61 1.72

Source: Vermont Department of Taxes, Annual Report Based on 2017 Grand List Data, January 11, 2018

The table above presents statewide averages and the property tax rates in any single community could be higher or lower.

The increase in Vermont’s property tax rates is striking.  Vermont’s Homestead Effective Property Tax Rate in 2017 was 29% higher than 2008.   The Education component increased from 1.18 to 1.49, a 26% increase.  The municipal component increased from 0.43 to 0.59, a 37% increase.  So long as these costs continue to rise at a faster pace than underlying property values, there will be pressure to increase property tax rates.

Impact on Value

As discussed above, property values are not strongly correlated to education or municipal costs.  However, property values are directly correlated to property tax rates.

As property tax rates go up, the future cash burden on the homeowner goes up in step, therefore increasing the fixed cost of home ownership.  If the future cost of ownership increases, the amount one is willing to pay up front and absorb that obligation will decrease.  The same is true for interest rates.  If mortgage rates are lower or higher, home values tend to increase or decrease accordingly.

Homeowners have the option to fix their interest rates, thereby eliminating the risk that their mortgage costs will increase over a 20-30 year time frame. Unfortunately, property tax rates cannot be fixed.  There is a risk of property tax increases every year.  To the extent the market believes the risk of tax increases is high, the negative impact on property values could be even greater.

Over the last ten years, declining interest rates have helped to offset the cost of increasing property tax rates.  Property values during this period have been largely flat to down.  Now, interest rates are higher and property tax rates seem unlikely to decrease.  For new buyers, the cash burden of home ownership looks likely to increase further.


Key Facts & Figures: 7. Vermont’s Housing Market

According to the US Census Bureau, Vermont had 335,224 housing units in 2017 with a median value of $218,900.  Approximately 70% of these housing units are owner-occupied and the remainder rental units.

In this series of articles, The Informed Vermonter will take a look at house prices, rent levels, housing costs and trends affecting the housing markets in Vermont.  How Vermont compares to the USA as a whole will be highlighted throughout.

The focus of this article is housing prices.

The Good Old Days

1997 would have been a good year to buy a home in Vermont.  The “All Transactions House Price Index” for Vermont, which is published by the Federal Reserve Bank of St. Louis, stood at 225.67 in the fourth quarter of 1997.  By the fourth quarter of 2007, the index had increased to 457.06.  During this decade, house prices doubled in Vermont, growing at a compound annual growth rate of 7.3%.

Vermont actually outperformed the entire US housing market in the 1997-2007 period. For the US as a whole, house prices went up 1.8x representing a growth rate of 6.2%.

With hindsight, it is now clear that the 1997-2007 housing boom was fuelled by an easy money mortgage market that went dramatically bust in 2008.  As it turned out, house prices in Vermont peaked in the first quarter of 2008.  The next decade would be very different.

The “Great Recession”

What a difference a decade makes.  Having peaked in early 2008, Vermont’s house prices began to decline: for six consecutive years.  The bottom of the market was reached in the first quarter of 2014 when the Vermont All Transactions House Price Index reached 433.5.  From the peak, house prices had declined 5%.  House prices in Vermont did not recover to 2008 levels until 2017 and only now are a bit higher in certain corners of the state.

Looking at the entire USA, the housing market was much more volatile than the Vermont experience.  First, the downturn was both quicker and much deeper.  The US market bottomed in 2012, two full years before Vermont hits its low point.  From peak to trough, US house prices declined 18.9% compared to only 5% in Vermont.

Offsetting the sharp decline, the entire US market experienced a quicker and steeper recovery than Vermont.  House prices fully recovered by mid-2016 and now stand about 12% above peak 2007 price levels.

Over the last ten years, Vermont’s housing market was more stable than the US as a whole, but also more stagnant in terms of price appreciation.  Basically, Vermont’s housing market demonstrated both less downside risk and lower upside potential.

There may be cause for optimism in certain parts of the state.  Over the last 12-15 months, Vermont’s house price growth has begun to accelerate.  For the 12 months ended Q2 2018, the Vermont All Transactions House Price was up 4.5%.

Unfortunately, not all of Vermont is sharing in these gains.

Location, Location, Location

 The house price recovery in Vermont varies widely from county to county.  While Vermont’s statewide house price index has fully recovered, only four counties have an index value higher than 2007. Indeed, if Chittenden County were removed from Vermont’s house price index, statewide values would still be below 2008 levels.

The chart below provides a county-by-county breakdown of house prices over the last ten years, ranked by price performance.

                      All Transaction House Price Index (2000=100)

County 2007 2016 2017 % Change: 2007-2017 % Change: 2016-2017
Chittenden 166.21 174.20 180.34 8.5% 3.5%
Grand Isle 173.04 174.65 182.37 5.4% 4.4%
Addison 170.0 167.65 176.25 3.4% 5.1%
Washington 173.47 174.59 177.68 2.4% 1.8%
Franklin 164.74 161.62 160.99 (2.3%) (0.4%)
Lamoille 172.89 159.94 164.17 (5.9%) 2.6%
Caledonia 174.09 154.49 158.93 (8.7%) 2.9%
Windham 162.14 139.23 146.92 (9.4%) 5.5%
Orleans 165.67 151.31 149.79 (9.6%) (1.0%)
Orange 165.55 150.40 148.35 (10.5%) (1.4%)
Windsor 167.67 145.31 147.62 (11.9%) 1.6%
Bennington 164.88 134.54 138.10 (16.2%) 2.7%
Rutland 166.57 138.16 139.03 (16.5%) 0.6%
USA 8.0% 6.5%

Source: Federal Reserve Bank of St. Louis, Economic Data (“FRED”).  Note: “FRED” does not provide data for Essex County.


The financial crisis of 2008 and resulting recession hit rural areas of the country particularly hard, including most of Vermont.  At the extreme end of the spectrum, residents of Rutland and Bennington counties saw the value of their homes decline by over 16%.  Only now are house prices beginning to creep back up, but in most of Vermont property values remain well below 2007/2008 levels.