Date January 28, 2004
For immediate release
Live Tax Free or Die:
How Vermont’s tax regime drives business to New Hampshire
Latest in AIMS’ Atlantica Series demonstrates importance of getting taxes right; otherwise people and businesses ‘vote with their feet’
Vermont is driving retail business out of state with its sales tax. That is the conclusion of the most recent Atlantica paper released today by the Atlantic Institute for Market Studies, a public policy think tank in Halifax, Nova Scotia.
The Atlantica project is examining the International Northeast as one interconnected economic zone. As part of this multi-year research initiative, AIMS is releasing A RIVER DIVIDES IT: A Comparative Analysis of Retailing in the Connecticut River Valley of Vermont and New Hampshire authored by Art Woolf, Associate Professor of Economics at the University of Vermont. This paper shows how damaging the effects of poor public policy can be in a region where people and businesses can escape the consequences of that policy merely by crossing a nearby border.
This study examines the nature and extent of changes in retail activity in the border counties of Vermont and New Hampshire over the past forty years. The border counties have exhibited similar rates of population growth over that period, but the economic growth rates of the two regions have diverged significantly.
Dr. Woolf states in his report that, “If Vermont had not implemented its sales tax, Vermont’s border counties would have 1,900 more retail jobs and $322.7 million more in retail sales than existed in 1997.” There is evidence provided that the public policy choices Vermonters have made are pushing retail business across the Connecticut River. Importantly, the study also concludes that the effect of Vermont’s sales tax took well over a decade to be felt, as businesses and customers came to understand the importance of the tax differential Vermont’s regime created.
This paper is a component of a much larger initiative being led by the Atlantic Institute for Market Studies (AIMS). Through the Atlantica project, AIMS is focusing on removing the barriers to cross-border economic growth in the region that includes the Atlantic provinces, northern New England, northern New York state and southern Quebec. AIMS is developing the intellectual tools and policies that will allow people to think and act regionally about trade, borders, immigration, investment, energy, environmental and fisheries issues.
Brian Lee Crowley, president of AIMS said upon release of the paper, “New Hampshire’s state motto is “Live Free or Die”. From an economic standpoint, the distortion caused by the sales tax in border areas would appear to bear this out. It’s clear from Dr. Woolf’s research that tax competition works. A competitive tax regime can and does improve the attractiveness of a jurisdiction as a place to work and invest. The Vermont border counties are paying the cost of this lesson.”
Dr Woolf has been a professor at the University of Vermont since 1980. In 1987 Dr. Woolf was a visiting economist for the Center for Energy Policy Studies at the Massachusetts Institute of Technology and in 1988 Governor Madeleine Kunin appointed him Vermont State Economist, a position he held until 1991. Art Woolf received his B.A in history from Cornell University. He attended graduate school in economics at the University of Wisconsin-Madison, receiving his Ph.D. in 1980.
For more information on A RIVER DIVIDES IT: A Comparative Analysis of Retailing in the Connecticut River Valley of Vermont and New Hampshire please contact: