Income and Wealth Distribution Report - April 3, 2024

Chairwoman Kornheiser introduced Stephanie Yu (Executive Director, Public Assets Institute) on Wednesday, saying they usually hear from them earlier in the session. Her presentation included a lot of data about the economic distribution coming out of Covid and how the ARPA funds prevented a worse recession. These funds “prevented what could have been a deep, lasting recession and reduced child poverty nationally from 2020 to 2021 by 46 percent,’ the report concluded.

Yu’s conclusion was that “We learned from the pandemic that government can do a great deal not just to ease the pain of crises but also to prevent the ups and downs of ordinary life from becoming crises. Government help is good for people and for the economy.” She claimed that it would be a mistake to “ignore that lesson and return to the way Vermont raised and spent money before the pandemic. And we don’t have to. Vermont has the resources and know-how to address its problems.”

Another key takeaway from the report is that income inequality is starting to reverse. Kornheiser sized on this, asking Committee to context of the work they have been doing on the Education Fund and who is impacted by property taxes. Representative Beck asked if the Public Assets Institute (PAI) data included wages only. Yu confirmed this was the case and capital gains were not included.

NOTE: PAI seems to believe this reversal is because of government policy, but in reality, it seems more likely related to the workforce shortage creating more competition at the low end of the workforce market.

Representative Ode wanted to see some comparison about specific employers that “mistreat their people with poor employment practices,” asking if they can get at these issues of low pay and benefits by employer.

Yu sidestepped the question and focused back on increases at the top end of the income sale that are driving today’s inequality. She described an “explosion of CEO salaries” versus regular workers. She acknowledged the way they chart may seem a simplistic way of looking at the economics, but her issue is the middle incomes are not moving while the lowest rise slightly more, and the top 1% rise explosively.

NOTE: Yes, this is a problem! Incomes for middle class Vermonters is not keeping up with the growth in expenses.

Branagan commented that this middle-class issue has been a concern of hers and since the 1970’s, saying that “we need to go about improving childcare, education, healthcare without taking away necessarily from the increases of people at the top.”

NOTE: Vermont actually has one of the lowest ratios of 1% shares of the overall economy at 15.2%. The US average is 20.1% and neighboring states, like New York, have as high as 29.1%.

Yu claimed that “there is a huge body of evidence about how too much income inequality harms everyone… including these people in the top 1% right because there are public health and public safety consequences.” However she did not cite any research supporting this.

Representative Sims asked if there is a sense whether “these trends hold across the state and the different populations.” Yu admitted that “the story of Chittenden County has not always been the story of the rest of the state.” What is consistent is that wages are lower than the national average, but cost of living (COL) varies.

Ode noted that housing is raising the COL, she wondered if they needed a ratio for Education Fund purposes.

NOTE: Everyone seems to forget that two-thirds of Vermonters pay property taxes based on their income.

Ode pressed on, asking “how would PAI’s vision of tax policy drive what the state looks like economically.”

Yu didn’t have an answer but stressed investments in education and housing.

See the full report.

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