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Personal Income Growing In Vermont, But Mostly For The Rich

This week the U.S. Bureau of Economic Analysis published its annual estimates of average state personal income, but a Vermont economist says the numbers lack some telling details.

According to the BEA estimates, personal income growth nationally slowed to 2.6 percent in 2013, compared to growth of 4.2 percent in 2012.

In Vermont, average personal income rose 2.88 percent in 2013; above the national average but below the state's 2012 growth of 3.71 percent.

The BEA data breaks down state personal income growth by industry and by year dating back to 1930. 

In addition to their use by researchers and economists, the BEA estimates serve as the basis for determining federal matching grants to states and to project tax revenues and anticipated demand for public services. 

But economist Tom Kavet of Kavet, of Rockler and Associates, which advises the Vermont Legislature on economic matters, says more useful and important figures are generated by the Vermont Department of Taxes. 

Kavet says the BEA’s average personal income numbers fail to reveal important aspects of income data.  Chief among them is what Kavet describes as “a pronounced tilt in the distribution of income towards the higher income classes.”

Kavet says very strong growth in personal income among those earning at least $125,000 versus those earning less is evident in state data collected over many years.

Pages 11 and 12 of the January 2014 Economic Review and Revenue Forecast Update prepared by Kavet’s firm provides quantitative information on the income growth disparity.

According to the data, those earning 125,000 - $150,000 saw adjusted gross income increase by 23.8 percent between 2009 and 2012.

The increase is more dramatic for higher earners. Those earning $1 million and above saw a 73 percent increase.

In contrast, middle class earners saw increases of less than 4 percent and those at the lowest end of the income scale saw their adjusted gross incomes decrease.

The report points out that because of this trend and Vermont's income tax structure, “those earning more than $200K [annually], now pay more than 40 percent of all Vermont income tax…there is a growing concentration of income tax paid by a relatively small number of taxpayers."

The Public Assets Institute’s State of Working Vermont 2013 makes the same point about the personal income growth disparity in a slightly different way.

Charts on pages 20 and 21 of the study show that while total personal income grew 20 percent in the 10 year period between 2002 and 2012, median household income actually fell by 5 percent.

Kavet says BEA data lags behind current statistics and also involves estimates by the bureau.  On the other hand the tax department income tally is more accurate and up-to-date.

Adding to the BEA’s challenge, Kavet says, is the fact the bureau’s budget has been cut.

“Unfortunately they have also been stressed on what they could do on the collection side,” he says. “There are lots of good things that they have done in the past that have been limited by their own funding.”

Kavet says the BEA statistics are a piece of a puzzle but a minor one compared to what Vermont tax figures reveal.