Vermont has long used tax breaks as an incentive for private-sector job creation. Those jobs, however, have to meet certain wage thresholds in order to qualify for the incentives. And the Shumlin administration says it’s time to lower the salaries needed to qualify for what’s known as the Vermont Economic Growth Incentive.
Brenan Riehl is the president and CEO of GW Plastics, a manufacturing firm that has facilities in Bethel and Royalton. It also has factories in China, Mexico and Arizona, which is to say that GW Plastics has plenty of choices when it comes to where to grow its business, as Riehl pointed out to House lawmakers recently.
One big choice facing GW Plastics right now is where to locate the jobs that will be associated with a major new medical devices contract the firm recently picked up. “And the question we have not answered yet is, where are we going to put that business?” Riehl told House lawmakers recently.
Riehl says lawmakers can improve Vermont’s chances of getting those jobs considerably by going along with a proposal from Gov. Peter Shumlin to lower the hourly wage needed to qualify for the tax breaks handed out under a program known as VEGI – short for the Vermont Economic Growth Incentive. “We wish to continue to grow and invest in Vermont, but we and our customers are concerned about the increasing cost of doing business in Vermont versus our other locations,” Riehl said.
"We wish to continue to grow and invest in Vermont, but we and our customers are concerned about the increasing cost of doing business in Vermont versus our other locations." - Brenan Riehl, president and CEO of GW Plastics
Riehl was among the half-dozen or so employers at a public hearing last week who stressed the importance of adopting the governor’s proposal. The plan would lower the wage threshold needed to qualify for VEGI from 160 percent of minimum wage to 140 percent.
The lower pay would apply only to job proposals in economically distressed parts of the state. But Burlington Rep. Chris Pearson, leader of the House Progressive Caucus, says it’s bad public policy to hand out incentives for jobs that pay as little as $12.80 an hour.
“We need to be stimulating good-paying jobs, solid, middle-class jobs,” Pearson says. “And this is a move in exactly the opposite direction.”
Pearson says the proposed new minimum would fall well short of a livable wage. The Massachusetts Institute of Technology calculates livable wage in Windham County, for example, to be $18.53 an hour for a family of four.
"We need to be stimulating good-paying jobs, solid, middle-class jobs. And this is a move in exactly the opposite direction." - Burlington Rep. Chris Pearson
Jack Hoffman, senior policy analyst at the left-leaning Public Assets Institute in Montpelier, says people getting the new jobs could in many cases still be eligible for subsidized health care, food assistance or other government programs.
"At that rate, many of these people would still qualify for public assistance programs." - Jack Hoffman, senior policy analyst at the Public Assets Institute
“It’s going to contribute to the budget squeeze that everybody’s been complaining about this year … At that rate, many of these people would still qualify for public assistance programs,” Hoffman says.
Commissioner of Economic Development Joan Goldstein says the new hourly wage rates don’t include the minimum benefits that must also be offered in order to qualify for VEGI. And Goldstein told lawmakers that a job that pays $12.80 an hour is better than no job at all. “And I think that we should do all in our power to encourage employment of unemployed or under-employed persons and reduce the dependency on public assistance,” Goldstein says.
Other proponents of the plan say the new wage base would rise when the state minimum wage increases to $10.10 per hour over the next two years. And they say that the wage base is only a starting point, and that salaries would increase as new employees gain experience and tenure.
"I think that we should do all in our power to encourage employment of unemployed or under-employed persons and reduce the dependency on public assistance." - Joan Goldstein, commissioner of economic development
The proposal would not raise the existing $10 million cap on annual VEGI payouts, though the Agency of Commerce might seek approval from the Emergency Board if they want to approve eligible job-growth proposals that would result in tax breaks in excess of the cap.
Companies don’t begin to accrue tax breaks until they’ve produced the jobs they promised.
The Senate has already passed the new wage threshold; the House Committee on Commerce and Economic Development is now considering the proposal.
