#40 Vermont

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The overall freedom ranking is a combination of personal and economic freedoms.

From 2012

State Facts

Net Migration Rate (?) -1 % 
Personal Income Growth (?) 2.43 %
How does the freedom ranking relate to these?


Vermont’s economic policies are generally much worse than its social policies, but Vermont businesses have carved out a niche for themselves that has afforded the state reasonable economic growth over the past decade and a half. Time will tell whether this performance can be sustained; we expect not, unless the state reforms its fiscal regime.

Vermont is one of the highest-tax states in the country. It also looks extremely fiscally centralized, with state government taking 9.5 percent of personal income and local government taking just 1.7 percent. However, this statistic is overstated, since Vermont counts the property tax as a state tax, even though towns have some discretion over the rate at which it is set locally. Vermonters would benefit from more fiscal decentralization, though, as they have 3.5 effective competing jurisdictions per 100 square miles. Government subsidies have usually been above average but have recently fallen to average (0.1 percent of income). Government debt is a bit below average and public employment a bit above.

Vermont does not do very well on land-use freedom, but it actually does better than neighbors New Hampshire and Massachusetts. As a result, land is more affordable than in those states. The state has done little to restrain eminent domain for private gain. The minimum wage for the local economy is very high, and it has been rising since 2010. We show a big jump in health insurance mandates between 2008 and 2010, the last available year. The state legislature authorized single-payer health insurance, but the executive branch declined to implement the law, and so we do not code this law in our index. Cable and telecommunications have been liberalized. Occupational freedom is better than the national average. For instance, it is the only state not to license landscape architects. Vermont has sunrise review for new licensing proposals, and it is one of the few states with such a requirement to have taken it seriously, as evidenced by the review reports posted online.131 Nurse practitioners gained full independent practice authority in 2011–12. Insurance freedom is excellent, with a “use and file” system for most property and casualty lines, long-standing membership in the IIPRC, and no rating classification prohibitions. In general, Vermont is one of the least “cronyist” states. However, it has a hospital certificate-of-need law and in 2013–14 enacted an anti-science and anti-consumer labeling law for genetically modified organisms. Its civil liability system is mediocre; the state has passed no tort reforms.

Vermont is our number one state for gun rights. The only policies it could improve are in allowing carry in more locations, providing an optional carry license for reciprocity with other states, specifying no duty to retreat, and legalizing silencers. It is one of the lowest states for alcohol freedom, with a state monopoly over wine and spirits retail and beer wholesaling. It is one of the better noninitiative states for cannabis, with decriminalization and a reasonably broad medical law. However, maximum penalties are rather high, high-level possession is a felony, and Salvia divinorum was banned in 2011–12. Vermont took travel freedom with one hand and gave back more with the other in 2013–14, enacting a primary cell phone ban, which research has shown to be useless, but also letting illegal immigrants get driver’s licenses and placing some limits on automated license plate readers (though the latter law has sunset as of this writing). Vermont has almost no legal gambling. Physician-assisted suicide was enacted in 2013–14. The state does well on educational freedom because some towns are allowed to “tuition out” students, a century-old practice approximating a voucher law. Homeschool regulations are fairly tough. Tobacco freedom is extremely low, with airtight smoking bans, vending machine and Internet purchase restrictions, and high cigarette taxes. The incarceration rate is about average for its crime rate, but victimless crime arrest rates are very low. Vermont has one of the better asset forfeiture laws, but police frequently evade it. Same-sex marriage was enacted in 2009–10, replacing civil unions.

Policy Recommendations

  • Fiscal: Undo the past two decades of centralization with a constitutional amendment limiting state government responsibility for education. Return property tax–varying power and school budgeting power fully to towns, and reduce state aid to a low level. Use the proceeds to cut income taxes.
  • Regulatory: Cap punitive damages and abolish joint and several liability.
  • Personal: Legalize recreational cannabis sale, cultivation, and possession.
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