By Guy Page
December 16, 2019 – The percentage of Vermonters in their prime working years of ages 25-64 will drop below 50% by 2030, a Dec. 6 demographic study says.
In other words, prime working-age Vermonters will be a minority. While Vermont’s total population will remain stable, its age and working status are in for big changes, and soon. When the youngest “baby boomers” hit retirement age by 2029, one in four Vermonters will be senior citizens.
That’s the main prediction of a Dec. 6 demographics study, “Population Changes and Vermont State Revenue,” published Dec. 6 by the Vermont Tax Structure Commission of the Vermont Joint Fiscal Office. The report is long on data but doesn’t delve into comprehensive solutions. Key takeaways:
Income tax revenue will drop. Baby boomers ages 55-64 now generate more than a quarter of state personal income tax revenue. The blow of lost revenue may be softened as some people choose to work into their 70’s. But overall Vermont should expect not only less income tax revenue, but less sales tax revenue. Senior citizens don’t buy as much stuff as young people or those in their prime. They’re more interested in healthcare, cash donations, and frugality. However, overall consumption revenue is likely to remain stable through 2030.
Vermont’s taxation of senior income will buffer revenue losses. It’s a policy long decried by frugal senior citizens: Vermont taxes social security and other forms of senior income. As the baby boomer ‘cliff’ approaches, that policy may be a plus from a revenue point of view. Vermonters who don’t move to Florida and other tax-friendly states must (barring a change in Vermont tax law) pay retirement income taxes. Add in the likelihood that Vermont seniors are fairly wealthy and may work longer than expected, and Vermont’s revenue slide may be more gentle than in senior tax-exempt states, the study said.
School revenue may suffer. The Vermont Education Fund relies heavily on the sales tax. As seniors spend more on non-taxable items like health care and cash contributions to charity, and less on consumer items, school revenue may decline.
In-migration of working people is critically important. Not for the first time in the state’s history, officials are concerned about a worker shortage. “States with low birth rates (like Vermont) must rely on domestic and international migrants in order to maintain or grow their population and achieve generational balance,” the study found.
Foreign immigration rate is already five times native birthrate in northern New England. “A July 2019 analysis from the Federal Reserve Bank of Boston illustrates the growing importance of immigration to northern New England. The study shows the three states added nearly 60,000 immigrants from 1990 to 2017, a growth rate of 63%, while the region’s native-born population increased by less than 12%.”
In short, Vermont will need new workers to generate tax revenue and to support the economy. People think the worker shortage is bad now…..? In the eldercare business alone, just wait until the demand for both in-home and nursing home care skyrockets, even as the employee pool continues to shrink. Other state studies have suggested drawing eldercare workers from bi-lingual, nearby Quebec. Pay increases for elder care providers may be proposed.
But that’s a discussion for another day. The Dec. 6 study firmly establishes one fact: as Vermont gets older and grayer, there will be employment and state revenue consequences.
Categories: Health Care