In a recent interview on VPR, Gov. Douglas discussed economic development, electric rates, and VT Yankee (among other things). He said “This is the cheapest power that we have. We’re talking about this in the context of the greatest economic crisis we’ve faced in some time, and one of the key costs of doing business in Vermont and in this part of the country is the cost of electricity.”

According to the Economic Census, that’s not true.  For manufacturers, the cost of purchased electricity as a percentage of the value of shipments ranges from 0.2% to 2.1%.  For perspective, the cost of materials for manufacturers ranges from 31% to 57% and the cost of total compensation from 12% to 32%.

Even though New England electric prices are higher than other parts of the country, it’s pretty clear that electricity is NOT “one of the key costs of doing business in Vermont”.

Even if we could wave a wand and reduce the cost of electricity by 15%, the impact on the cost of products manufactured in VT would be negligible (see below). [The figures are adjusted to reflect Vermont’s higher electric costs than the national average.]

Savings per $100 of value if elec. costs drop 15%

$0.09 Trans. equip.

$0.12 Computers & electronic products

$0.12 Machinery

$0.14 Furniture

$0.15 Electrical equip. & appliances

$0.16 Food mfg.

$0.20 Printing

$0.21 Fabricated metal products

$0.27 Chemicals

$0.27 Wood products

$0.36 Plastics & Rubber

$0.42 Paper mfg.

$0.43 Nonmetallic mineral products

Obviously, businesses want to manage their costs as best they can. But to say that electricity is a “key” cost of doing business is a gross exaggeration.

The governor is entitled to his own opinions, but he’s not entitled to his own facts.

( – promoted by Jack McCullough)

They’re painting the passports brown

The beauty parlor is filled with sailors

The circus is in town

Bob Dylan, Desolation Row

That is to say, the legislature will soon reconvene.

As we head for the debate about the need for new revenues to help meet the budget crisis, keep these facts in mind.

The Tax Dept. reports that in 2007 there were 3,734 Vermonters who reported more than $300,000 in adjusted gross income. That’s 1.2% of all filers.

These folks earned over $3 billion. That’s 19% of all instate income for 1.2% of filers.

After adjustments ($8 million) and state credits ($18 million), they paid $166 million in state income taxes.

That’s 31% of the taxes on 19% of the income. Sounds nasty right.

But for those – like Jim Douglas – who proclaim that my goodness, they’re already paying so much of the total taxes collected, it wouldn’t be right to ask for more; note that it represents only 5.4% of their adjusted gross income. So much for the 9.5% top marginal tax rate routinely criticized by Gov. Douglas and his friends at the Tax Foundation.

So tell us again why we shouldn’t ask the wealthy to help solve this problem?

Note: Before anyone gets the wrong idea, this would not be much of a burden for this group. At present, if someone earns $1 million (forget capital gains for now), they will pay just over $88,000 in VT state income tax. If we increase the top rate for this group by 1% (actually 10% – from 9.5% to 10.45%), the same person earning $1 million would pay $94,000 instead of $88,000; only $6,000 more on an income of $1 million.

Wouldn’t it be nice if important public policy debates were based on facts?

“Corrected count gives Ashe sixth Senate seat”

Free Press web site

http://www.burlingtonfreepress…

I feel terrible for Ms. Barnard (no fun to think you’ve won only to learn you didn’t) but am very pleased with this result. Tim is a smart guy who knows how to work with other people and will be a great asset in the Senate.

( – promoted by odum)

The Free Press reported today that the Lydall will close its St. Johnsbury plant due to a slowdown in the auto industry.  As a result, 190 jobs will be lost. We can only hope the dislocated workers find new employment.

But this unfortunate incident illustrates a fatal flaw in the state’s main “tax incentive” program. Lydall was awarded $362,000 in tax credits by VEPC over the years. We have no idea whether the job growth during that period would have occurred “but for” the incentives. More importantly, the money spent (foregone tax revenues) is now gone and we have nothing to show for it. [Note: VEPC’s “clawback” provisions have not been very successful.]

Tax incentives are not long-term investments of public funds (like infrastructure, housing, or job training). When market forces lead companies to cut back or close taxpayers are left with no assets to build on for the future. Isn’t it (finally) time to rethink this?

( – promoted by odum)

is out there if anyone bothers to look (say perhaps reporters or candidates)

I posted this comment on the Rutland Herald web site in response to today’s article about the “debate” at the Tunbridge Fair.

Jim Douglas is reported to have said he had “overseen economic growth that resulted in 10,000 more Vermonters having jobs now than when he took office.”

This is both inaccurate and misleading.

First, according to the VT Dept. of Labor, there are 8,600 more non-farm payroll jobs today than in January 2003 — not 10,000. But 2,300 are government jobs (federal, state, and local). Is Douglas really suggesting his economic development policies are responsible for these government jobs? And isn’t it ironic and hypocritical for him to brag about government jobs as he’s cutting state jobs?

Second, the real measure should be private sector jobs. We have 6,300 more today than when Jim Douglas took office. And we’ve lost 2,000 since November 2006.

Third, context matters (but he won’t provide any). Vermont’s rate of private sector job growth used to track with the U.S. But since Douglas took office we’ve lost ground and are not keeping pace with national job growth.

Fourth, what kind of new jobs? Over one third of all net new private sector jobs are in “social assistance” which has an average wage under $18,000 per year.

Fifth, after recovering the jobs lost in the last recession (the normal bounce back), we’ve gained only 1,100 net new private sector jobs in three years.

Whatever happened to fact checking? Can candidates just say anything at all and have it printed or broadcast without reporters verifying the accuracy?

Jim Douglas’ jobs record is terrible. The facts cannot be denied.

BTW – In his 2008 State of the State address, Jim Douglas said “we’ve created 12,000 new jobs”. Now he says 10,000. I guess he figures no one is really paying attention. He may be right.

Today's Free Press article on new income data from the Census Bureau may have unintentionally caused some confusion (http://www.burlingtonfreepress.com/apps/pbcs.dll/article?AID=/20080827/NEWS01/80827030)

The article refers to a decline in the two-year moving average for median household income. It quoted several people who were at pains to explain the data. A little context will help.

First, the source of the data is the March Supplement to the Current Population Survey (CPS). It measures self reported income for the previous year. While the national sample for the CPS is quite large, the state samples are small and not always representative. This means that in any given single year, the sample might include too many high- or low-income respondents to be a fair representation. That's why Census publishes two- and three-year moving averages. This smoothes out the spikes in those odd (anomalous) years. Obviously, a three-year moving average will be less likely to show large spikes than the two-year average. The table below shows this clearly.

VT inflation adjusted median household income: Two and three-year moving averages (Census)

Notice how the annual % change is usually much greater in the two-year average.

three year rolling average: http://www.census.gov/hhes/www/income/histinc/h08B.html

two-year rolling average: http://www.census.gov/hhes/www/income/histinc/h08A.html

Second, the article referred to the change from 2005 to 2007 (4.7%). I'm not sure why the reporter used the change over two years instead of one (2006 to 2007), but the one-year change was 6%. This was more than twice the change in the three-year rolling average of 2.9%. Clearly, something is going on and it's not good. But the change appears to be less dramatic than first reported.

In any case, the response from the Governor's spokesperson was noteworthy for several reasons. Here's what the article reported:

“Jason Gibbs, spokesman for Gov. Jim Douglas, said the administration is leery of the Census numbers given that poverty levels have not increased and per-capita income has risen. He said one possible explanation for the decline in household income over the two-year period is the state's aging demographics. As more people retire, their household income declines, he said.”

1. While it's understandable that the Governor would be disappointed in such figures, it is a bit disingenuous to blame the Census Bureau, especially since the CPS is also the source of the monthly unemployment data (which the Gov. likes to cite when he thinks it reflects well on him). In any event, I have indicated above why I think the two-year figures are less than optimal, but even the three-year figures show a decline. We cannot wish this away or blame someone else.

2. The reference to rising per capita income demonstrates either a failure to understand the data or an attempt to mislead readers. Per capita income is simply total income divided by total population. It ignores the distribution of income, which is why the median is a better measure (the midpoint – ½ above and ½ below). The two measures are apples and oranges. Total income is heavily influenced by non-wage income (interest, capital gains, and dividends). And since almost half of all new income is going to the top 0.25%, it's not necessarily surprising to see an increase in per capita income as median incomes decline. They are not mutually exclusive.

http://www.nytimes.com/2008/08/26/business/economy/26income.html?_r=1&scp=2&sq=income&st=cse&oref=slogin

3. The suggestion that the decline may be related to an aging population is similarly uninformed. Although VT – like most other states – is aging, the number of additional people reaching retirement in any given year is much too small to effect the median household income.

Number of Vermonters 65 and older (Census estimates)

2006 — 82,966

2007 — 84,425 (change = 1,459; 0.2% of the total 621,254)

Census reports there were 240,634 households in VT in 2000. Nationally, the average household size for those 65 – 74 is 1.89 persons

(http://www.census.gov/population/socdemo/hh-fam/cps2007/tabAVG1.xls).

Thus, the 1,459 additional people over 64 in 2007 represent about 772 households or three tenths of 1% of all households. It is inconceivable that these few additional elderly households could have a measurable impact on the statewide median household income.

Moreover, according to the VT Tax Department, the average income of Vermonters 65 and older is higher than the statewide average income so it's not at all certain that the aging factor is relevant here.

Note: Howard Dean also complained about the reliability of the income data in the `90s when it showed a decline. Wouldn't it be refreshing if elected officials just acknowledged the problem?

(Excellent analysis – promoted by JulieWaters)

The Sec. of Administration sent a letter to the Joint Fiscal Committee yesterday regarding proposed reductions in the state budget.  It said that “Raising taxes is not an option…To swamp Vermonters with more taxes when they are getting crushed with higher fuel costs is too much for the average Vermonter, especially when we are still one of the higher taxed states in the nation.”

This is an outrageous distortion of the facts and is a reminder that this Governor is an adherent of the Grover Norquist school of governing.

First, Vermont is only one of the higher taxed states if you measure taxes paid per capita or as a percentage of total income.  But this ignores the distribution of the the “burden”.  Volume 2 of JFO’s Tax Study showed conclusively that Vermont’s tax system is one of the fairest in the country and that average Vermonters pay much less than people in most other states.  Look it up.  [Note: And don’t buy that crap about how the report didn’t include education property taxes. The income sensitivity provisions of the statewide property tax would make us look even better.]

Second, To my knowledge, no one has suggested raising taxes on average Vermonters.  But why shouldn’t the legislature look to those who can afford to pay a little more?  For example, the income of the top 0.2% of filers (492 families) increased by $338 million from 2005 to 2006.  Is the Governor really arguing that these folks would be disadvantaged if they were asked to help avoid cuts in public services?  This group earned $1.4 billion in 2006 and paid $79 million in income taxes (an effective rate of 5.7%).  If they paid 10% more, we could raise almost $8 million (a third of the $24 million General Fund gap).  This would represent less than 0.6% of their total income, which averages $2.8 million.  I don’t think it would change their vacation plans.

Third, it is disturbing that the Douglas administration wants State workers and those who rely on government services to shoulder all the burden of these budget adjustments.  The Governor’s proposal asks NOTHING of the wealthy in this difficult time.  Even Gov. Snelling understood that sacrifice should be shared.  Whatever happened to Vermont values?

Fourth, in my opinion, it is immoral to propose cuts to human services programs before reducing the number of PR flacks that work for the Governor.

Fifth, in light of the Auditor’s recent findings, it is troubling that off-budget tax expenditures like VEPC tax “incentives” were not targeted for reductions.  The Auditor found that many of the jobs supposedly created by this program would have been created anyway.  That means that some of the money was completely wasted.  Why wasn’t the VEGI program’s annual $10 million cap reduced?

We can only hope that the legislature will demonstrate more leadership and compassion than the Governor.  Protecting the wealthy as average Vermonters suffer is not what I expect from our elected officials during tough times.  

( – promoted by odum)

sent on Thursday July 10

Tonight’s WCAX broadcast included a piece on the new population / demographic data from the Census Bureau. The reporter said, “The census estimates showing anemic growth are reflected in another reality. Vermont’s work force is shrinking — down by 2000 in just the last year alone. Without some kind of upturn, that points to stagnation in Vermont’s economy.”

I’m afraid Mr.Potter is confusing cause and effect and does not understand the data.

First, the “workforce” is not the “labor force” and the “labor force” is not population.

The “workforce” is only those who are “employed”, which includes the self-employed and those working without pay in family businesses. This is not the same as jobs. The number of “employed” Vermonters has declined by 5,400 in the last year. It is the “labor force” that has declined by 2,000, not the workforce.

Note: The number of jobs during the same period is flat. This is not great news but illustrates the sometimes confusing difference between the “workforce” and jobs.

Second, the “labor force” (a term of art for the Census Bureau) only includes those who are working and those who have looked for work in the last four weeks. Not surprisingly, when the job market goes south, many people who want and need work stop looking until circumstances improve. If so, they are no longer considered part of the “labor force” (curious how people can be made invisible). Thus, the “labor force” may decline even though the working age population increases.

In any case, the decline in the “labor force” has nothing to do with population.

The number of Vermonters ages 18 to 64 has increased by over 7,000 during the last five years (estimated to be over 405,000 in July 2007).

In addition, many Vermonters age 65 and over continue to work.  National data shows that labor participation rates for older Americans have grown considerably in the last 15 years (34% of men and 24% of women ages 65 – 69 work).

Bottom line: There is no shortage of potential workers; only a shortage of jobs.

The report quoted the Vermont Commerce Secretary Kevin Dorn that “this is just further validation of what Governor Douglas has been saying for years now,” Dorn said, “which is, we’re faced with a declining work force. And what does that mean for our future economic development in this state.”

It is not “validation” – it is just spin. This is a convenient excuse for the failures of this administration. The number of working aged Vermonters is growing. The “labor force” and the “workforce” have declined because we’re in a recession and because there aren’t enough decent jobs. This has been going on for quite some time and has nothing to do with population changes.

It is disturbing that major media outlets do not seek information and perspectives from independent economists and other analysts. With respect, Kevin Dorn is not an economist or a demographer. He is a paid appointee of a governor running for re-election who has not lived up to the promise of Jim = Jobs. Why not contact the Legislature’s economist and get another perspective? When did it become sufficient for a journalist to quote an administration official (during a campaign for goodness sake) without any “balance”. And shouldn’t reporters get a better handle on the data before tackling such important subjects?

Viewers and readers deserve better.  

Thank you for the link to Bob Kinzel’s piece on the proposal to eliminate the 40% capital gains tax exemption. Peter Shumlin tried to talk seriously about the issue but Kinzel went into default mode (controversy is better than substance). He perpetuated the “tax burden” myth by quoting the Governor saying Vermonters are the most heavily taxed people in America. It is outrageous that a reporter on an NPR affiliate would be this compliant and sloppy. I wrote Kinzel a note (see below) and urge all of you to the same. We deserve better.

Doug Hoffer

“Your story about the proposal to eliminate the capital gains exemption quoted the Governor as saying that Vermonters are the most heavily taxed people in the country. The only measure that supports this assertion is based on per capita taxes (or taxes as a % of total income). There is no one in the phone book named per capita. It is an abstraction. As you well know,  VT’s graduated income tax distributes the so-called burden more fairly than most other states. This was illustrated nicely in Vol. 2 of JFO’s Tax Study. The facts don’t lie. So why do you (and other reporters) keep quoting the Governor when he is clearly misleading people? What ever happened to checking facts or holding elected officials to a higher standard when they make such statements? Media has to do more than simply repeat press release sound bites. It is a disservice and does nothing to advance the quality of the discourse. We expect it from the Free Press but it’s very disappointing for an NPR affiliate.”