What’s The Matter With Vermont?

Vermonters love their little bucolic state, but smallness may be a bug, not a feature

Feb 23, 2024

“What happens in Vermont stays in Vermont. (Nothing happens in Vermont.)” – popular Vermont t-shirt

“Keep Vermont Weird” – name of a souvenir shop in Burlington

“Vermont is the most European state in the Union” – The Washington Post

It has been hard not to notice the multiple moving vans loading neighbors’ household effects for their moves to another state. Or the requests at companies and federal agencies from employees who want to move elsewhere. Vermont is supposed to have a reputation as a nice place to live. It is quiet, a bit isolated, closer to Canada’s population centers than America’s, and above all, small. It is not an accident that many celebrities build comfortable hideaways here. But over the last two years, the mood has soured, and some residents are complaining that Vermont is stagnant, has no future, and is not a place where someone can live a middle-class lifestyle. But we see arguments like this being made everywhere in the country, reflecting the “bad vibes” or the sour mood as the country continues to sit in a post-pandemic funk we have discussed elsewhere in this newsletter. So do my neighbors assume the grass is always greener over the fence, or is something going wrong in Vermont?

The first expression that comes to mind answering this question is “it’s not a bug, it’s a feature.” the short answer is that many aspects of life in Vermont that seemed like features around 2020 have turned into bugs by 2024. While the SARS-CoV2 pandemic was hardly good for anyone, there were moments in which Vermont seemed to benefit. In the year between the outbreak and the distribution of the first vaccines, Vermont was one of the safest places in the United States, with fewer infections per capita. In 2021, once the vaccines rolled out, Vermont was among the leaders in distribution. On top of that, many businesses sent their employees home to telework, and it seemed for a time that it could become permanent. Workers who crammed into large cities to be close to employment opportunities were already disenchanted with the quality of life in big cities even before the pandemic, and many took the opportunity to telework from less congested areas. Vermont was a popular destination for those who could do Boston, New York, or Washington jobs remotely.

The relative flood of new pandemic residents stretched the state’s infrastructure, and tested not just Vermont’s smallness, but choice to be small. Vermont has long had a chronic housing shortage, alongside land use and development policies encapsulated in Act 250 enacted in 1970 to “ensure that larger developments complement Vermont’s unique landscape and community needs.” New England states in general have a proclivity to NIMBYism, and Vermont policy has aimed for keeping a rural atmosphere and a small population. This has gone against the broad national trend of encouraging the growth of cities, primarily as employment centers. The highest-paying professions concentrate in the largest cities, where they enjoy significant network effects, despite a high cost of living for their employees. The restrictions on development have driven the cost of living up as more people have tried to move to the state, and with the pandemic beginning to fade out, Vermont has to come to terms with the way it expanded between 2020 and 2022.

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As it comes to this crossroads, Vermont needs to consider the following issues in order to maintain a high quality of life:

Housing: Buying and renting are both expensive in Vermont. Median annual household income in Vermont is about $70,000, but housing costs are similar to more densely populated areas with incomes well into the mid-six figures. The average monthly rent on a two-bedroom apartment exceeds $2,000, which means that the median Vermont household pays well over one-third of its pre-tax income on housing. Most houses on the market right now are selling for ten times the median income. Supply is constrained, and few new houses have been built over the past twenty years, owing to a combination of national conditions in the construction industry and state and local zoning/land use laws. The influx of pandemic residents has made the housing shortage lal the more obvious, and there has been a push to build more housing statewide, and especially in Burlington. Burlington’s student population is often blamed for inflating the demand for housing, and the University of Vermont has begun to build more student housing, as well as a number of new complexes for its employees, as it has had trouble hiring new employees who refuse offers because there is no open housing in Burlington. While there has been a notable increase in new construction, the increase in traffic on Market Street in South Burlington is a reminder that there will also need to be new infrastructure to accompany this housing, along with public safety and policing questions.

Employment and attracting new industries: As we have noted, salaries are low in Vermont, especially relative to the cost of living. The wealthiest residents work in the handful of professional jobs, or receive their income from out of state (this includes both remote workers and retirees). The pandemic labor shortages are particularly acute here, with many stores and restaurants closed or open short hours for lack of staff, and “help wanted” signs on nearly every business. However, these jobs are overwhelmingly part-time service positions paying under $20 per hour, not enough to afford a place to live. Vermont’s universities, at one time a significant source of higher-paid employment, have been contracting and shedding teaching positions since student numbers fell with the pandemic. Their graduates who would ordinarily stay here to look for professional employment increasingly leave the state. If the state is to grow in the coming decades, there simply needs to be more higher-end employment.

Taxes and scope of government: Vermont is an unapologetically blue state, one of the most liberal in the country, and certainly the most liberal rural state. It is no accident that Vermont is the home base of “democratic socialist” Senator Bernie Sanders. Vermont is one of the few states that attempts to use fiscal policy to redistribute income. It has among the most comprehensive welfare programs and the most progressive system of taxation. But that taxation can be a sticking point for retaining residents, especially the most recent pandemic arrivals. Some of the neighbors who are moving noted they were headed for Florida or Texas, officing warm weather and no state income tax. Fewer people seem to mention that New Hampshire (with neither an income nor a sales tax) is next door. At lower levels of income, below six figures, the Vermont income tax has a marginal rate of 3.35%, and most Vermont households pay just half the state income tax that they pay in local property tax. The top marginal rate is a high 8.75%, though lower than New York’s, and it begins at $280,000 of income for a married couple. In other words, it targets a small group of prominent people, especially doctors, many of whom have been leaving the state to practice elsewhere and providing a reminder of the limits on taxing high incomes in small states. Vermont’s sales tax is relatively low, at 6%, on a narrower base than most states (groceries, clothing, and services are exempt), influenced perhaps by tax-free shopping next door in New Hampshire, West Lebanon’s big box stores typically have parking lots full of green Vermont license plates. A 9% tax on restaurant meals adds to the sense that Vermont is an expensive place for luxuries.

Climate change and the environment: While some Vermonters have joined a national migration toward the Sun Belt, those who remain often do so for the climate. Cool summers and cold winters are part of Vermont’s identity. Global warming is being felt here, however. Some claim that Vermont could be a winner from climate change, as below-zero Fahrenheit temperatures become less frequent during the winter and the average summer high temperature moves closer to 80 degrees, more temperate than summer highs in East Coast cities. In fact, Burlington often takes the list of the ten top North American refugees from climate change. But a warming climate means more rain, and in July 2023 days of heavy rain caused disastrous flooding in Montpellier and other towns along the Winooski River. Mild winters are also undermining the tourism industry, especially the ski reports like Stowe and Killington.

Aging population: Like the populations of most rural states, Vermonters are older than the national average, with implications ranging from lower labor force participation to the need for greater amounts of medical care. Older residents are more likely to own their homes and benefit from rising house prices. They are also more likely to live on pensions and accumulated wealth rather than from employment. Growth will require the state to be younger, which means keeping university graduates here with better jobs and more affordable housing.

Vermonters chuckle at the Keep Vermont Weird signs, but “nothing ever happens in Vermont” comes closest to capturing the ethos of the state. It is bucolic, but above all, small. And that is just how many if not most Vermonters want it. But a small state is consistent with an old state, and increasingly an unaffordable one that lacks the amenities and services that people in more densely populated states take for granted. Over the next two decades, Vermonters will need to ask themselves what they want, and what lifestyle they aspire to lead. The process of growing the state seems poised to be jarring and painful for many.

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