by Christine Stone
Vermont’s property tax carries the highest effective burden in the country — first out of 50 states, per WalletHub’s 2026 analysis, at 4.89 percent of income. Add income and sales taxes and the overall burden ranks third-highest nationally, at 11.1 percent.
The Tax Foundation’s 2026 State Tax Competitiveness Index ranks Vermont 42nd out of 50 — bottom decile for how attractive its tax structure is to residents and employers alike. Taxes fund roads, schools, and services — a trade-off Vermonters and their leaders openly debate. The question is what do Vermonters get in return for carrying one of the heaviest tax loads in the country.
A not-so-private economy that isn’t generating opportunity
Vermont has about 307,000 covered jobs statewide, per the state’s own labor market data, with private-sector employment around 256,000. Average weekly private-sector wages sat at $1,187 as of mid-2026 — roughly $61,700 a year — ranking Vermont 24th among states, below the national average, according to USAFacts’ analysis of U.S. Bureau of Labor Statistics data.
The state’s largest employment sectors, per Vermont Department of Labor figures, are Health Care & Social Assistance (nearly 50,000 jobs), Retail Trade (about 35,600), and Accommodation & Food Services (about 30,000) — essential, but not historically Vermont’s highest-paying or most dynamic. Manufacturing, the sector most associated with durable, exportable, middle-class wages, trails well behind at roughly 28,500 jobs. This isn’t the profile of an economy aggressively cultivating industry — it’s one drifting toward services and caregiving work.
Some of that drift is demographic — an aging population needs more health care, which is inherently local. Manufacturing works differently: Vermont’s manufacturers sell into national and global markets, not to local residents, so a factory’s decision to locate or leave hinges on permitting timelines, activist pushback, energy costs, tax treatment, and the workforce pipeline, not demand at home.
The demographic story explains health care’s growth; it doesn’t explain the state’s thin manufacturing base. That’s the product of choices: Vermont hasn’t built the industrial-recruitment or workforce-pipeline apparatus that states like New Hampshire use to pull in manufacturers.
Vermont’s Fastest-Growing Industry is Government
Government at all levels — federal, state, and local combined — accounts for roughly 17 percent of Vermont’s total employment, around 56,000 jobs, a number that has grown about 7 percent since 2021 even as the state’s population has shrunk. Education is the clearest example of the state acting as an employer without a corresponding return.
Vermont spends $28,697 per pupil — the second-highest rate in the nation, according to National Education Association data — and staffs the lowest student-to-teacher ratio in the country, 10.3 students per teacher. That would make sense with stable or growing enrollment. It isn’t: Vermont’s K-12 enrollment has been falling for years, and the state’s own data show the decline accelerating, forcing mergers and closures even as per-pupil costs climb. Vermont is paying more, per child, than almost anywhere in the country, with no public accounting.
If the state wants credit for being one of Vermont’s largest employers — through its schools, its university system, its agencies — it has to be evaluated the way any employer that size would be: hiring efficiently, producing value commensurate with its cost, and anchoring people in the state rather than administering their decline. The University of Vermont and the UVM Health Network are among the largest employers in the state, and both depend heavily on public support, tax-exempt status, and state policy decisions. When the state’s largest employers are a hospital network, a university, and the government itself, that’s not a diversified, self-sustaining economy.
The nonprofit sector’s outsized footprint
Vermont’s nonprofit sector is commonly cited as roughly 6,400 organizations, tracing to Common Good Vermont’s 2015 count of 6,409, with 4,109 public charities — a dated figure; more current directories put registered nonprofit and 501(c) entities closer to 10,000.
As of 2022, Vermont nonprofits employed roughly 44,000 people directly, about 1 in 5 Vermont workers, generated over $10 billion in revenue among public charities, and accounted for close to 20 percent of the state’s gross state product — a larger share than manufacturing, retail, or construction. A sector this large removes a proportional share of value from the taxable property base while absorbing a substantial share of state and federal contract dollars to deliver services the state would otherwise fund directly — both sides of Vermont’s fiscal ledger at once.
Put together, government employment (roughly 56,000 jobs, about 17 percent of Vermont’s 307,000 total covered jobs) and nonprofit employment (roughly 44,000 more, 2022 data against a mid-2026 total, so an order-of-magnitude comparison) account for close to a third of everything Vermont counts as employment — outside independent, market-competing, fully taxpaying private enterprise. This is why Vermont’s private economy isn’t so private: the remaining roughly 210,000 jobs are closer to the state’s true private sector, and much of that is healthcare and human-services work paid substantially through Medicaid and Medicare rather than open-market transactions.
Good jobs on paper, temp jobs in practice
Even where the state is creating jobs, it isn’t always creating good ones. Vermont law caps “temporary” state employment at 1,280 hours a year — roughly eight months — and bars using that classification for work that is “ongoing and continuing,” meant to prevent workers being kept in temporary status year after year for jobs permanent in everything but name. The Vermont State Employees Association has documented that the Commissioner of Human Resources approved roughly 61 waivers of that statutory cap in a single ten-month stretch in 2016 alone, citing budget constraints and staffing shortages — not the “bona fide emergency” the law requires. The effect is departments staffing ongoing, permanent functions with workers legally barred from the retirement contributions, health insurance, and collective-bargaining protections classified state employees receive.
When the legislature asked the administration, through Act 172, to identify which functions should shift to permanent staff, the answer was seven converted positions in 2018 and a flat refusal to convert more — a structural incentive working as designed. Position counts set by the legislature pressure agencies to keep headcount off the books, and classifying a job “temporary” is the release valve, at the worker’s expense. A position that pays an hourly wage but denies retirement security, health coverage, and a voice in working conditions isn’t the “good state job.”
Paying salaries that don’t stay in Vermont
There’s a second accountability gap in the state’s payroll, cutting the opposite direction from the labor question above: not who Vermont under-classifies, but who it employs at all. As of September 2025, 552 State of Vermont employees lived outside Vermont, across 31 states and one Canadian province, per VTDigger reporting. That’s a snapshot count, not a trend line — but the hiring pattern behind it is clear: the state hired 559 out-of-state employees in all of 2019, rising to 753 in 2024 alone. The departments relying most on out-of-state staff — Corrections, Children and Families, and Health — are core service agencies, not administrative edge cases.
Every state employee’s salary is funded by taxpayers regardless of where they live. Vermont doesn’t have a “convenience of the employer” tax rule like New York or Pennsylvania; it taxes income based on where work is physically performed. A state employee working remotely from Florida or North Carolina generally isn’t generating Vermont-source income at all — no income tax collected, and no paycheck spent at Vermont grocery stores, contractors, or main-street businesses. It’s tax revenue that leaves the state’s economy the moment it’s issued. A state watching its working-age population shrink fast shouldn’t grow the share of its payroll flowing to people who live, spend, and pay taxes elsewhere.
The housing plan doesn’t match the money behind it
The state’s answer to aging and declining populations is Governor Phil Scott’s push to build 8,000 homes a year — up from a recent pace of roughly 2,300 — on the theory that housing scarcity is driving workers away and keeping new ones from arriving. That diagnosis doesn’t hold up against the state’s own labor data: Vermont’s unemployment rate sat at 2.7 percent in January 2026 while 7.1 percent of workers held multiple jobs in 2025 — well above the 5.4 percent national rate — meaning Vermonters are finding work but not enough pay from a single job, a shortage of wages rather than a shortage of housing.
Vermont built about 3,000 units in 2024 and only 1,600 in 2025, against a target of 5,600 to 8,200 a year — moving away from the goal, not toward it. The 2024 bump came largely from roughly $700 million in one-time pandemic-era housing money now running out, and the FY2026 budget cut funding rather than replacing it: the state’s main rental and homeownership loan programs were cut to $14.5 million, and GROW — meant to connect new housing to workforce growth — received nothing. The state’s largest current initiative, a $35 million revenue bond repaid through the property transfer tax, is expected to produce just 550 to 650 units over two to three years — a fraction of one year’s shortfall against an 8,000-unit target.
Funding is only half the constraint; building cost is the other. Act 181, Vermont’s 2024 land-use reform, targets that: it exempts designated town and village growth centers from the Act 250 review that has blocked the density needed to make modular and missing-middle housing pencil out at lower cost. The first tier took effect in January 2026, with temporary exemptions running through mid-2028, so there’s no track record yet of what it’s done to costs or supply.
Even at current prices, most Vermonters can’t buy what’s being built: only 6 percent of renters could afford a median-priced home in 2023, down from 32 percent two years earlier. The labor to build more housing is itself short: Vermont’s roughly 15,000-person construction workforce needs on the order of 500 to 1,000 additional net workers a year to hit the state’s targets.
What the state actually owes Vermonters
A state with the third-highest overall tax burden in the country, and the single highest property tax burden, owes residents more than assurances — starting with removing the barriers within its own control: modernize permitting so it isn’t a second, bureaucratic tax on top of a fiscal one, confirm record per-pupil spending is producing outcomes worth the cost, and justify payroll growth against a shrinking population rather than exempt it from scrutiny.
That’s not a radical ask — it’s what any taxpayer should be able to demand of any government: charge this much, show what’s delivered in return. Right now Vermont hasn’t answered that question: a private sector concentrated in lower-wage service work, a state payroll and school system growing while the population shrinks, and a permitting system even the state’s own business community says needs to be rebuilt. Until it does, “investing in the future” is not an answer — it’s a deferral.
Sources: Vermont Department of Labor (Economic & Labor Market Information, ELMI/QCEW data); U.S. Bureau of Labor Statistics (Quarterly Census of Employment and Wages, Vermont, Q4 2025); USAFacts analysis of BLS wage data (June 2026); WalletHub, “Tax Burden by State” (2026); Tax Foundation, “2026 State Tax Competitiveness Index” and Vermont state profile, and “Teleworking Employees Face Double Taxation Due to Aggressive ‘Convenience Rule’ Policies in Several States”; National Education Association, “Educator Pay and Student Spending” (2025); Vermont Public, “Vermont population declines again” (Jan. 2026), citing U.S. Census Bureau estimates; Vermont Chamber of Commerce, Act 250 modernization position statement; Seven Days and WCAX reporting on Vermont Agency of Education enrollment data (2026); Vermont Agency of Administration memo, “Sections F.11 and F.12 of Act 172 (2016 session)” (Jan. 15, 2019); 3 V.S.A. §§ 311, 331; Vermont State Employees Association, petition to the Vermont Labor Relations Board re: temporary-employee waivers; VTDigger, “Data: How many Vermont state government employees live out of state?” (Sept. 25, 2025) and “State government workers living outside Vermont must also follow return-to-office policy” (Oct. 3, 2025); Seven Days, “The Rise and Fall of Springfield, Vermont’s First ‘Tech Hub'” and “Building a Workforce: Vermont Is Trying to Bolster the Ranks of Skilled Workers to Construct Housing, but It Will Take Time”; Vermont Daily Chronicle, “Vermont built a way to count the homes it builds. The first count shows it falling further behind”; Vermont Chamber of Commerce, “Budget Advances Key Chamber Priorities, but Concerns Remain Over Housing Program Cuts and Unmet Workforce Needs”; Vermont Housing and Conservation Board, “VHCB Will Use $35 Million in Bond Funds to Address Vermont’s Housing Shortage”; Vermont Agency of Commerce and Community Development, Vermont Housing Needs Assessment 2025–2029; Governor Phil Scott, transcript of 2025 inaugural address, and Fiscal Year 2026 budget address (Waterbury Roundabout); Common Good Vermont, Vermont’s Nonprofit Sector data portal.