Pat McDonald and Ben Kinsley are co-hosts of the show “Vote for Vermont.” On a recent show, they interviewed Matt Cota, the Executive Director of the Vermont Fuel Dealers Association. The topic for the show was carbon tax.
As many Vermonters know, there has been a strong movement to implement a carbon tax in Vermont. For years there has been testimony in the State House by many lobbying organizations such as VPIRG, EIV, CLF, VBSR, and others.
Matt noted that last session a carbon tax bill which would result in $0.88 per gallon tax increase in gasoline and $1.02 per gallon tax on diesel fuel and heating oil was defeated because of the negative reaction from Vermonters. Matt explained that this year the issue was back in a rather unique way. Several legislators introduced their bills on the same day in April and at the same time at press conferences around the state. Each proposed to reform different taxes in exchange for a carbon tax.
Matt reviewed each of the bills as follows: H.528 proposed to cut income taxes for Vermonters, small businesses and would double the earned income tax credit used by low-income resident. H.532 proposed to decrease statewide education property tax rates by replacing education fund with revenue raised through a fee on carbon dioxide pollution. H.533 proposed to reduce the sales tax by 1% while phasing in an equivalent tax on home heating oil, propane and the sales tax. H.531 proposes to establish a carbon pollution fee that starts at $10 per ton and increases each year until it equals to the “social cost of carbon” as established by the EPA. The bill then proposed that the revenue collected be returned to Vermonters on an equal and quarterly basis in the form of dividend checks or direct deposit.
These four bills were submitted in what is called a “short form”. The short form bills act like placeholders for the more detailed bills to come. Matt stated no action was taken this year, but he is confident they will be taken up in 2018.
A fifth bill, H.394 proposed to require the JFO to study the cost and benefits to Vermont of carbon pricing and cap and trade models to reduce greenhouse gas emission. A similar study was done 3 years ago at a cost of $40M (Remi Study). This study was voted on with a $100,000 appropriation.
Matt also mentioned a Joint House Resolution 6 which requested the Governor to advocate for a regional carbon tax and to convene the regional greenhouse gas initiative states. Matt said that, in theory, increasing the cost of carbon based fuels will result in less carbon dioxide emissions, as fewer people will be able to afford to heat their homes or drive their vehicles.
Matt said that when the numbers are put on a spreadsheet, it all looks doable and meets the goal of reducing Vermont’s carbon foot print while being revenue neutral. But when you think about the ramification on the ground with individual Vermonters who will be directly impacted it presents a different picture.
Carbon taxes impact many sources of fuel: gasoline, diesel fuel, natural gas, heating oil, propane, kerosene, butane and aviation fuel. Supporters hope to artificially raise the cost to force Vermonters to find alternatives. But as Matt noted, Vermont is a rural state with many needing to drive long distances to work. They have older homes that are not insulated as the newer urban houses and so they consume more.
There is concern that a carbon tax would impact the state’s economy and many doubt that the lowering of a sales tax would bolster retail businesses on Vermont’s borders. Companies wanting to move to Vermont may not want to pay 50% more in energy prices. With regard to the replacement of the sales tax, Vermonters are free to make decision on purchases that have sales tax but have little choice when it comes to buying gasoline or fuel.
As for a cap & trade tax as with regulated utilities Matt reminded us that gas stations are not regulated so tracking and selling credits would create a real challenge.
Matt explained that 50% of our carbon footprint comes from transportation; 30% from home heating and 20% from agriculture and energy production. He said that the fuel industry has made great strides in improving system design and insulation which has substantially reduced carbon emissions and will reduce more over the next 10 years. The same can happen in the transportation area with electric cars, improved alternatives like biodiesel and ethanol.
If carbon tax is implemented, the state must worry about “leakage” where people find alternative ways around paying the tax, like going across the border to stock up on gasoline and heating oil, etc. And the less fuel that is purchased, the less in tax revenue there is to fund road and bridge construction, as well as environmental cleanup and weatherization programs.
Matt believes there must be other ways to achieve the state’s goals without taxing everything. He also believe that the carbon tax impacts the low and middle income households.
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