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October 06, 2020

Covid is the Ill Wind that Brings Opportunity to Vermont

Wealthy people are coming to Vermont for refuge. They are turning seasonal homes into permanent homes, buying homes, expanding homes, and building new ones. After years of trying everything to stem the net exodus of tax-paying people including bribes to get people to move here or work from here, Covid is doing what we couldn’t do on our own and may help save the state and education budgets from a spiral of decline.

Realtors are working flat out. So are electricians, carpenters, plumbers and everyone else needed to add a work -from-home room or change one person’s dream house into someone else’s dream. Home prices are going up rapidly. The importance of a good Internet connection is even greater than it was before. These aren’t retired people; they intend to work safely from here.

We’re entitled to pat ourselves on the back to some extent although other resort areas are experiencing similar immigration. The fact that we’re so far (cross your fingers) the safest state in which to shelter from Covid helps. Many of these newcomers already know and are well-disposed to Vermont because they have vacationed here. A month of demonstrations around City Hall in Burlington is nothing like what’s been happening in real cities.

The benefits and costs

Jobs selling, building and remodeling homes for the refugees as well as continued jobs supporting their lifestyle. They will be restaurant patrons as restaurants reopen and their guests will stay in hotels as the virus wanes. They’ll recreate here even more than they did before. Epic Pass sales in Stowe are significantly higher than last year.

More sales tax revenue whether they shop here or have Amazon ship to a Vermont address.

Property transfer taxes are already coming in. New and remodeled houses will add to the base for property tax and help take pressure off the education fund. However, as towns reappraise, properties similar to the ones being purchased are going to see their appraisals and probably taxes go up.

Increased prices for housing. Good if you’re selling a house. Not so good if you’re buying or renting.

An increased base for Vermont nonprofits to fund raise from. The challenge will be to involve the newcomers in the community as quickly as possible.

Well-heeled demand for better broadband. Buildouts paid for by those now working from Vermont can also serve those who have not been attractive enough prospects for the cable companies on their own.

The big kahuna: more income tax revenue. This good be huuuge if we play our cards right. Most of these people are continuing to work at their old jobs, which they now know can be done remotely. Consider an investment banker who moves here from New Jersey and keeps on investment banking from her Zoom room in Stowe. Is she working in Vermont or New Jersey? To whom does she owe income tax? Our taxes are high but states like New York, New Jersey, and Massachusetts have similarly high or even higher state taxes. She may have a choice of which state is her tax residence. To whom does she want to owe income tax? We want that choice to be Vermont, of course. We don’t need rock-bottom taxes to compete, just be slightly better than the competition. Also need to make sure our tax structure is among the first in the nation to be work-from-home friendly.

Is this Just a flash in the pan?

Once there’s a vaccine does the panic subside and everything return to the old normal? I don’t think so. The old normal is gone.

Many high-earning people have learned they can work from wherever they want to live. They don’t need to be at many meetings in person. They don’t need to travel incessantly. The slow movement to remote work became an avalanche. Remote work works. Many people will decide they don’t want to go back to the office in the city and don’t need to live within commuting range. If 1% of the people in the urban areas in the Northeast decided to come to Vermont, that would be more than we could handle.

Fear of pandemics will linger even when the novel corona virus fades into the seasonal flu.

Urban unrest and urban decay are getting as bad as they were when the wave I rode in on left the cities and suburbs in the late 60s and early 70s and came to Vermont. Many of that wave were “trust-fund hippies” (not me). This wave is high earners.

The urban problems are likely to get worse before they get better no matter whom is elected next month. Vermont is entering a virtuous cycle of more state revenues without higher tax rates – maybe we could even lower tax rates and provide good public services. The cities have the opposite problem: declining revenue as businesses go remote and both revenues and property values fall.

And in conclusion…

The new normal is giving Vermont a sudden opportunity for growth and prosperity just when stagnation seemed to be intractable. Growth will bring problems as well as opportunities. Making the most of the opportunities and mitigating the problems of growth are our challenges for the next decade. Should be fun.

See also: Forward to a New Normal

After the Pandemic: A Lot Less Commuting

John McClaughry: Orienting Vermont’s new immigrants

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