Vermont sales tax damaged retail sales in Connecticut River corridor

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Vermont sales tax damaged retail sales in Connecticut River corridor

Tue, 11/16/2010 - 9:20am -- tim

According to an economic study conducted by Art Woolf, PhD, an economist with Northern Economic Consulting, Inc, Vermont’s sales tax has inflicted ‘significant harm’ on towns along the Connecticut River corridor. The study, released today, was funded by a consortium of Vermont organizations including the Beverage Association of Vermont; Vermont Chamber of Commerce; Vermont Grocers’ Association; Vermont Retail Association; and the Vermont Wholesale Beverage Association. 
The study concluded that the sales tax has dramatically changed the pattern of retailing and the location of retail activity in the counties that border the Connecticut River, leading to a significant loss of the retail market in the Vermont border counties.
Some of the study’s key findings:
· Before 1969 (when Vermont implemented its sales tax), per capita retail sales in the two regions were identical. Today, Vermont’s per capita sales are 60% of New Hampshire’s.
· Inflation-adjusted per capita sales in Vermont were actually less in 2007 than they were thirty years earlier, while they had doubled in New Hampshire.
· By 2007, per capita retail sales in New Hampshire’s border counties were $18,000 compared to $11,000 on the Vermont side of the river.
· Over the 2002 to 2007 period, which includes Vermont’s most recent sales tax rise from 5% to 6%, per capita sales in New Hampshire rose by $2,000. In Vermont the increase was half that’$1,000.
· Every time Vermont has increased its sales tax rate, the retail sales gap between Vermont and New Hampshire has widened.
· If Vermont had maintained the pre-1970 status quo with New Hampshire, there would be 3,000 more retail jobs and $540 million more retail sales in Vermont’s border counties.
· The economic damage imposed by the sales tax continues to worsen.
According to Vermont Chamber of Commerce President Betsy Bishop, ‘While taxes fund necessary state government services, some policies have serious consequences, including the continued decline of a once-thriving retail sector in Vermont’s Connecticut River Valley.’
Joan Goldstein, Executive Director of Green Mountain Economic Development Corporation, said, "This is indicative of how tax policy can encourage or discourage development." She pointed out that variety in retail "drives behavior" just as much as tax policy. She said this is "detrimental to border towns" and believes Vermont's tax policy needs to be more of a behavioral study. 
Source: 11.16.2010. Beverage Association of Vermont, Vermont Chamber of Commerce, Vermont Grocers’ Association, Vermont Retail Association, Vermont Wholesale Beverage Association, Green Mountain Economic Development Corporation.

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