Across the US, states compete for employers and employees with large tax subsidies, holidays, and incentives. Vermont’s lone program is the Vermont Employment Growth Incentive program (VEGI), which has some defining features that set it apart from other states’ programs.
VEGI provides cash incentives to employers that create new Vermont-based, high-paying jobs. In order to earn these incentives, an employer must meet performance targets that they create in collaboration with the Vermont Economic Progress Council (VEPC), a board composed of appointees of the Governor and General Assembly, as well as nonvoting representatives from regional economic development corporations and regional planning commissions.
State dollars are safeguarded in several ways. First, the program gives as an incentive to the business only a portion of the taxes that the business generates in the state, so the state is, no matter what, in a better place than it would have been but for this activity. If you’re looking at a VEGI award and thinking that it’s a lot of money, then you are witnessing just a portion of how much tax revenue the VEGI recipient is putting into the Vermont economy. The state always makes money on this program.
Second, the incentives are only awarded to the applicant if they meet the predetermined goals approved by VEPC, so if the employer doesn’t meet their end of the deal, they don’t get an award; it’s really that simple.
It’s for these reasons that we get to the title of this commentary, there is no such thing as a failed VEGI application. An applicant who gets approved for an award only to later not qualify is, by all definitions and the parameters of the program, a success. They did not meet their agreement, and they subsequently will not receive any award. If they do meet their targets, they receive an incentive; meanwhile, Vermont is enjoying the benefits of new jobs, investment, and tax revenue.
As our sole economic incentive program, VEGI is an essential tool for Vermont. Skeptics doubt this claim, pointing to our state’s low unemployment rate as evidence that job creation is not needed at such a time. However, this neglects the fact that these awards help Vermont businesses attract new workers from outside the state at a time when we have a workforce gap of over 20,000 people. Additionally, VEGI awards help foster “anchor employers,” larger employers with diverse roles and pathways that can provide stable jobs for a worker’s entire lifetime. Finally, the capital investments that accompany a VEGI award can help protect existing jobs and encourage better use of employees’ skills.
Innovation is a good thing, and we should always be considering ways to make VEGI better. For example, the Department of Taxes is currently restricted by law from sharing certain information with the public. While some opaqueness is essential to prevent competitors of the businesses receiving awards from weaponizing proprietary information to their competitive advantage, some of the restrictions can also make the program appear less transparent than it could be; in fact, frequently, these restrictions actually prevent the stories of the program working as it should from being told.
Like in many other cases, Vermont, with the VEGI program, has innovated and right-sized an economic incentive program that excels at creating economic opportunity and expends our resources judiciously.
This is a Joint Commentary by LCC President Cathy Davis and GBIC President Frank Cioffi.