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by Clara Morrison, for the Right for Vermont Foundation
In 1996, The Republican Governor’s Association released a publication that included a comparison of New Hampshire and Vermont as a natural experiment in economic policy. The data was striking then, but what’s remarkable is how little has changed.
Two states. One border. Very different choices.
Vermont and New Hampshire are nearly identical in ways that matter for economic comparison: neighboring New England states with similar climates, topography, population sizes, and historical roots. They even share a long border. What they don’t share is a philosophy of governance.
In 1996, A Tale of Two States laid out the case that New Hampshire’s lower-tax, smaller-government approach was producing measurably better economic outcomes. The data showed faster job growth, higher per capita incomes, and a dramatically lighter tax burden in New Hampshire.
Three decades have passed. Vermont’s policymakers had every opportunity to read the data and adjust course. Let’s see what happened.
Job growth: then and now.
The 1996 pamphlet highlighted annual employment growth in the early 1990s, where New Hampshire was consistently outpacing Vermont. From 2020-2021, Vermont’s Covid losses were nearly twice as deep as New Hampshire’s (-6.64% vs. -3.65%). Both states rebounded in 2022, but only New Hampshire sustained the momentum. By 2025, Vermont had slipped back below zero, losing jobs on net while New Hampshire continues to grow.
The tax gap didn’t close. It grew.
In 1995, Vermont residents paid 12.8% of their personal income in state and local taxes. New Hampshire residents paid 9.7%. That 3.1% gap was already significant, but now it’s up to 4%.
Over the last 30 years, the tax burden has had a real impact on each state’s population growth – one of the clearest signals of a state’s economic health. People move toward opportunity and away from cost. Since 1992, trends show that people value the opportunity afforded in New Hampshire.
Since the early 1990s, New Hampshire’s population has grown by roughly 35%, from about 1.1 million to over 1.4 million today. Vermont’s population has grown by about 14% over the same period, from roughly 571,000 to just over 650,000.
Last year, Vermont experienced the fastest rate of out-migration in the country, while New Hampshire continues to draw people from neighboring states in search of lower costs, more opportunity, and a government that takes a smaller share of what they earn.
Competitiveness: the ranking gap persists.
The original 1996 comparison cited a Small Business Survival Foundation survey ranking New Hampshire 6th nationally for small-business competitiveness, with Vermont a distant 45th.
After three decades and countless opportunities for reform, Vermont has failed to close that gap, largely because it has not adopted policies that have reduced tax or regulatory burdens on small businesses. What was identified as a warning sign in 1996 has instead proven to be a structural reality:
$1.3 billion a year leaking across the border.
Perhaps the most dramatic illustration of Vermont’s tax disadvantage appears in border retail activity. In the late 1970s, before Vermont’s sales tax climbed, per capita retail sales in New Hampshire border counties were about 17% higher than adjacent Vermont counties. By 1992, that gap had widened to 60%. By 2007, it reached roughly 200%.
Despite Interstate 91 running along Vermont’s side of the Connecticut River, consumer activity has increasingly shifted east.
A study published in the Vermont Economy Newsletter and later updated by economist Doug Rosien found that by 2017, Vermont was losing $9,524 per capita in annual retail sales in border counties. With 163,607 residents in those counties, that amounts to roughly $1.3 billion in annual retail leakage – about 4% of Vermont’s GDP.
As Vermont raised its sales tax from 3% to 4% to 5% and eventually to 6%, its retail sales as a percentage of New Hampshire’s border county sales fell from near-parity (~95%) to roughly 40%. Each tax increase accelerated the divergence:
It’s not politics. It’s pattern recognition.
This comparison was initially framed as Republican Governor versus Democrat Governor, but both Vermont and New Hampshire have elected governors from both parties over the last 30 years. What has remained more consistent in each state is not party leadership, but governing philosophy: limited government versus more centralized government, lower taxation versus higher taxation, and regulatory environments designed either to reduce barriers to business or to impose more protective oversight.
Vermont’s policy choices, while reflecting sincerely held values around public investment, social services, and the role of government, have produced clear and measurable economic outcomes that clearly show what Vermonters are missing out on. Over the last 30 years, policymakers in Vermont have not consistently taken a full and honest accounting of those tradeoffs, and good intentions alone cannot justify poor long-term economic consequences – particularly where those outcomes have run counter to their intended goals.
The debates Vermonters are having today about affordability, economic competitiveness, and growth are largely the same debates they were having in 1995, yet policy has not shifted toward the model that evidence suggests is more closely associated with sustained growth.
The evidence from border counties is especially difficult to dismiss because it controls for nearly everything except tax policy. The same region, same climate, and same consumer base exist on both sides of the border, the key difference is that one state taxes retail sales and the other does not. The result is approximately $1.3 billion per year flowing east across the Connecticut River.
Acknowledging this should not be a partisan concession, but an invitation to engage with three decades of accumulated evidence and to ask whether the current approach is truly serving the people of Vermont. The answer to that question should matter to every Vermonter, regardless of party affiliation.
A Tale of Two States, and the way it has held up over the past 30 years, reinforces a broader principle: fiscally responsible policies grounded in principles of subsidiarity, when paired with lower tax and regulatory burdens, tend to expand opportunity for families, businesses, and communities. It is time for Vermonters on both sides of the aisle to engage honestly with that reality.
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Categories: Business, New Hampshire, News Analysis, Taxes
When I came up to Vermont in 1979 (a Long Island Republican) it was an independent but Republican stronghold. However, the – give me’s and the spend other people’s money liberals were coming here also. I often wonder how it would have been if I took the 89 South exit at White River Junction instead of the 89 North. But I stayed and will continue to fight the fight and wait until other people’s money runs out.
I came here in ’71 from NJ. It is still better than NJ, but getting worse daily. I do wish I had picked NH, more and more every day. How can democrats be so consistent in making peoples lives worse and not change?
I wish they would reproduce the report with current statistics.
Taxation in Vermont has no impact on its congressional delegation, all of whom are aliens to Vermont – two from Massachusetts, one from Brooklyn, two are communists, one is …. throw the dart, all are millionaires.
In New England, when 5 states declined to send official delegations or fund state exhibits at the Great American State Fair – the National Mall centerpiece celebration for the U.S. 250th anniversary – only New Hampshire set a booth up.
It’s what happens when you allow Communists take over the government of your state. Vermont is only getting what it deserves, just like NY City is going to get what it deserves with Mamdani. COMMUNISM KILLS EVERYTHING.
Interesting comments from those that moved to Vermont in the better times and now wish they went East instead. I find those that moved here and didn’t get into government are much better people than those that sought power and control by getting elected. Case in point, a recent article by VDC about 4 females from out of state that live in different towns. The understanding bottom line was they fabricated a false scenario about being terrorized and feared for their lives base on their voting records (?) being in Government. Common sense is that all 4 together at different locations couldn’t be threatened at the same time maybe one. Reading between the lines, it seems they got together over coffee in one place wanting notoriety, so the terrorism concocted story for headlines and sympathy. This is the trouble with alike people in Vermont government. Headlines and using falsehoods to promote their Act 181 cause. Not caring about the people affected and their lands. Government needs to be white washed of these people. SICK.
I’ve lived in NH 1978 to 1999 and know NH is a far better place than VT. Taking a trip around recently, the state is booming, construction, better roads and little restriction for building or shopping. Bet the VT gov people travel there to shop, VT doesn’t have the places and has taxes. Taxes are a killer and VT is dying and from different points of view is dead. Interstates built in 1964 (I was there) started VT’s downturn with Phil Hoff (MA).
NH doesn’t have a communist wall and there are bridges over the water.
Like so many others, I have buyer’s remorse about moving to Vermont rather than New Hampshire. The overregulation and taxation in Vermont, and the tight central control that those in government exercise, are strangling this state. Sadly, the true culprits are the voters of Vermont, who all too often are not involved in how the state operates. They do not question or hold officials elected or appointed to account and will be bribed with their own tax money to receive free stuff! Two choices exist: total collapse by migration, economic stagnation/decline, living on the dole for most people, or a radical change in the voters’ behavior at the polls. You can imagine what the Vermonters will choose based on their track record!
This is a classic case of the old adage, “you can’t have there come here without here becoming there”. Even the oldest of these “new Vermonters” arrived here when Patrick Leahy became senator in 1975. This is how the state turned around from republican in 1974 to the Leftist democrat wasteland it is today.
We get the kind of government we deserve.
Reps. Dara Torre moved to Vermont from Colorado.
She graduated from Oberlin College with a bachelor’s in history and a minor in government. She holds a ‘certificate’ in nonprofit management from Marlboro College and a ‘certificate’ in climate change and health from Yale School of Public Health. How did that prepare her to be on the House Committee on Energy and Digital Infrastructure considering matters relating to energy, utilities, telecommunications, broadband, information technology, cybersecurity, and other similar policies? Maybe she’ll be taking over Margaret Cheney Welch’s position when her five year term runs out.
Rep. Theresa Wood ‘relocated’ to Vermont is a child but it’s hard to know when. She attended Champlain College (haha) earning a Legal Assistant degree (?) and later a bachelor’s degree in business from JSC.
Somehow that supposedly ‘qualified’ her to bounce around on the House Committee on Human Services, Health Reform Oversight Committee, the Joint Fiscal Committe, the Joint Legislative Justice Oversight Committee, the Joint Legislative Management Committe, the Special Committee on Capitol Complex Flood Recovery, and the Special Committee on State House Improvements? Wow!
Rep. Candice White relocated to Vermont in 2003. She moved here from Boston. She holds a a Bachelor of Arts degree in English Lit from Boston College. How that prepared her to be on the House Committee on Transportation is a bit of a mystery, but if you don’t think she’s connected, take a look at her biography!
From liberal magazines to the ski industry!
Last but at least, Sen Ann Cummings …. Anne relocated to Vermont in November 1975. Her biographical records state that she was born in Holliston, Massachusetts, but prior to becoming a resident of Montpelier, she was educated in Wantagh, New York, and Lexington, Kentucky! Degreed up from Cardinal Cushing College, Brookline, Massachusetts (BA in sociology); St. Michael’s College (MSA, in administration).
She is the former mayor of Montpelier and been a member of the Senate since 1997. Can you say term limits?