On April 12, 2017

New carbon tax proposals look to shift burden onto pollution

By Mike Polhamus, VTDigger

Four House members are proposing what they’re calling tax reform bills that all seek to institute carbon taxes while reducing or eliminating other taxes or returning the revenue to Vermonters through other means.

One of the bills would eliminate Vermont’s sales tax and raise the same amount from a tax on carbon dioxide pollution, a contributor to climate change.

Another would return all its revenue to Vermonters through dividend checks every three months.

A third would exempt businesses earning less than $400,000 a year from paying income tax and would cut income tax rates across the board while doubling a tax credit for low-income residents.

The fourth would slash property taxes for education and raise the equivalent amount through a tax on carbon dioxide pollution.

The bills have not yet been fully written, and lawmakers say this is the beginning of a push to enact legislation during next year’s legislative session.

Lawmakers proposing the bills say all four are revenue-neutral, meaning they do not increase taxes overall or generate any additional government revenue.

The four sponsors are Reps. Diana Gonzalez, P/D-Winooski, Johannah Donovan, D-Burlington, Sarah Copeland Hanzas, D-Bradford, and Martin LaLonde, D-South Burlington. The announcement of the bills came Monday at a news conference in Barre where people held signs reading “Tax reform & climate action.”

Without having seen the legislation, the head of Vermont’s Republican Party said the bills will raise taxes and that the party opposes them all.

Republican Gov. Phil Scott’s spokeswoman, Rebecca Kelley, responded with the following statement:

“During the campaign, Governor Scott said that he would not support any new taxes or fees, including a carbon tax—a commitment that captured strong support from Vermonters around the state. Yet, it appears legislators are poised to put forward proposals this week to introduce a carbon tax, increasing costs of living and doing business in Vermont. While Governor Scott is committed to protecting our environment, introducing a new tax that will make Vermont less affordable and make our businesses less competitive in the global economy, is the wrong approach.

“Vermont is already setting a national example for encouraging more fuel-efficient transportation, green building practices, energy conservation, and renewable energy. We can continue to be a leader in environmental stewardship, while balancing this leadership with the urgent need to reverse the crisis of affordability. For example, Governor Scott has proposed to incentivize energy efficiency adoption through a sales tax holiday on energy efficient consumer products and electric vehicles. Unfortunately, legislators are choosing a far more regressive path with a tax mandate.

“Regardless of how the carbon tax is disguised in these proposals, each would increase the costs of doing business and as those costs are passed on to the consumer, these proposals will increase the cost of living for all Vermonters. Further, this creates an enormous new tax capacity with no guarantee to completely offset revenue for the long-term.

“To grow our economy, we must focus on policies and initiatives that make Vermont more affordable and encourage growth through smart policy and incentives, rather than discouraging growth through taxes, fees, and onerous mandates from Montpelier.”

Vermont GOP Chair Dave Sunderland also said the bills are a trick by Democrats and Progressives. Sunderland said he had not read any of the four bills but declared “it’s just not true” that they wouldn’t increase taxes.

“These proposals all have components that will increase the cost of living in Vermont,” Sunderland said.

His party, Sunderland said, “diametrically opposes any new increase in taxes that will impact working middle-class Vermonters.”

But revenue-neutral carbon taxes have been adopted elsewhere, said Vermont Law School professor Janet Milne, who is director of the Environmental Tax Law Institute.

The classic example of a revenue-neutral carbon tax is found in British Columbia, Milne said, where low-income residents actually receive more in return from the tax than they pay.

There is “no debate” over whether British Columbia’s carbon tax actually accomplishes this, Milne said.

“It guarantees that all revenue goes back to taxpayers, in the form of tax reform,” she said. British Columbia’s carbon tax contains multiple mechanisms to ensure it doesn’t result in an additional tax burden for residents, Milne said.

If British Columbia’s carbon tax raises any new revenue, for instance, the province’s finance minister loses 15 percent from his or her paycheck that year, Milne said.

Other countries have instituted carbon taxes that do raise additional revenue, such as Ireland and Japan, she said.

Governments have seen their gross domestic product rise and emissions fall in countries both with revenue-neutral carbon taxes and with carbon taxes that are not revenue-neutral, Milne said.

The carbon tax bill that would return all proceeds to Vermonters through quarterly dividend checks was copied from a recent proposal by members of the administrations of former presidents George W. Bush and Ronald Reagan, said Gonzalez, the bill’s sponsor.

“My plan is a conservative plan,” she said.

Vermonters spend roughly $2 billion each year on fossil fuels, or around $3,200 per person, said Donovan.

She is introducing a bill that would double the earned income tax credit for about 40,000 low-income Vermonters, while exempting businesses earning $400,000 or less from paying income tax. The bill would also cut the income tax rate for the lowest-income Vermonters to 1.75 percent, from 3.55 percent.

These cuts would be funded with an equivalent amount of revenue from a tax on carbon dioxide pollution, Donovan said. The proposal would strengthen the economy, create jobs and reduce the cost of living within the state, she said.

Copeland Hanzas has another bill that would eliminate Vermont’s income tax altogether and replace that revenue with an equivalent amount brought in from taxes on carbon dioxide pollution.

LaLonde’s bill proposes dramatic reductions to the state’s property tax, again to be offset by an equal amount of revenue from a tax on carbon pollution.

Lawmakers planned to introduce all four Tuesday, April 11.

The bills are not expected to pass this year, Gonzalez and Donovan said. Rather, they’re meant to be “a good jump-start” to next year, the second half of the biennium, Gonzalez said.

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