A fascinating study conducted by Northern Economic Consulting has examined an issue that most people along our border with New Hampshire already know about: how Vermont’s sales tax and Act 250 have cost the Green Mountain State prosperity over the decades since its enactment, as businesses locate to the New Hampshire side of the Connecticut River Valley instead of the Vermont side. (Story continues below these charts from Northern Economic Consulting).
Everyone knows that if you tax something, you get less of it; that’s just basic economics, and it’s indisputable even by reality-averse individuals on the political left. This study contains one of the most striking illustrations of this point: even though the Vermont side of the river has the incredibly powerful draw of an interstate highway all along the border, commercial activity still locates on the NH side, because it avoids the sales taxes and the regulatory costs and delays inherent in going through Act 250 approvals.
Another interesting finding of the study is that the damage caused by Vermont’s over-taxation and over-regulation is becoming irreversible. At first, the businesses that relocated to NH were the ones most affected by the sales tax and Act 250 requirements. But eventually, that led to the NH side of the border offering a lot more retail choices for shoppers, which attracted larger and larger numbers. So now, even businesses that don’t have to charge higher prices to customers because of sales taxes – such as grocery stores and restaurants – have started to locate on the NH side, simply because that’s where all the shoppers are. And of course it helps that they don’t have to contend with the bureaucratic costs and delays inherent in Act 250.
The bottom line: per-capita sales and income in the NH and VT border regions were almost identical in the decade leading up to the sales tax and Act 250 in Vermont. After that, those figures diverged, with Vermont losing out to its less tax-and-regulation-happy neighbor.