1. BLUE RIBBON TAX COMMISSION Dec. 8, 2009 Revenue for a Sustainable Economy: Green Taxes, Common Assets, and Subsidy Reform Gary Flomenhoft, Research Associate/Lecturer in Public Administration, Community Development and Applied Economics Gund Institute Fellow

2. Green Taxes Melissa Bailey Thomas A. Benoit Sr. Amanda Dow Davis John Demeter Cheryl L. Diersch Peter M. Freeman Andrew Jope John Mejia Rachel Marie Weston Acknowledgements Common Assets Ross Saxton Mark Kolonowski Beth Nolan Colin McClung Conor Casey Ian Raphael Will Murray Elliot Wilkinson-Ray Susan Skalka Invitation: Rep. Dave Sharpe & Commission Student Researchers

3. WHO AM I AND WHAT AXE AM I GRINDING? BS Mech Eng, Tufts Master Public Policy & Eco-Economics UMD Came to UVM in 2002 with Gund Teach RE, Macro, Intl Development Research in Public Finance for Sustainability Worked in all sectors: private, government, and non-profit: Taught HS, resorts, aerospace engineer, environmental groups, HUD, started three businesses. Love Vermont and see it as a laboratory of democracy where good ideas can be implemented through open government Political independent, everyone has part of the truth Policy wonk

4. TAXES=THIRD RAIL OF POLITICS

5. WHOSE OX WILL YOU GORE? OR WILL IT GORE YOU?

6. GREEN ECONOMY? PRICES VT GREEN ECONOMY Always cheaper to do the wrong thing.

7. SUMMARY-make prices tell the truth GREEN TAX SHIFT: TAX BADS, NOT GOODS COMMON ASSETS: "PAY FOR WHAT YOU TAKE, NOT FOR WHAT YOU MAKE" SUBSIDY REFORM: STOP SENDING GOOD MONEY AFTER BADS

8. ECONOMY = THROUGHPUT ECONOMY LAND USE DEPLETION POLLUTION Purpose: Max GDP = max throughput = DUMB GROWTH! (Value added) (By K & L)

9. ECONOMY = THROUGHPUT ECONOMY LAND USE DEPLETION POLLUTION Purpose: max value added/ minimum throughput=SMART GROWTH! (Value added) (By K & L)

10. GREEN TAX SHIFT WHATEVER YOU TAX YOU GET LESS OF, THEREFORE: TAX DEPLETION, LAND USE, AND POLLUTION MORE TAX VALUE ADDED (LABOR, CAPITAL INVESTMENT, BUILDINGS, ENTREPRENEURSHIP, ETC LESS REVENUE NEUTRAL

11. Survey-EU Green taxes

12. 1999 VERMONT TAXES

13. 2000 VERMONT TAXES

14. 2001 VERMONT TAXES

15. 2002 VERMONT TAXES

16. 2003 VERMONT TAXES

17. 2004 VERMONT TAXES

18. 2008 VERMONT TAXES

19. 2004 VERMONT TAXES

20. 2004 VERMONT TAXES: LAND&BLDGS

21. 2004 VERMONT GREEN TAXES

22. GREEN TAX CRITERIA 1.ECONOMIC EFFICIENCY 2.DISTRIBUTIVE EQUITY 3.ENVIRONMENTAL PROTECTION 4.EASE OF ADMINISTRATION Tax Commission Mandate 1.Sustainability 2.Appropriateness 3.Equity Minimize regressivity-minimize tax on LI Fair, efficient, effective administration

23. GREEN TAX NEW REVENUE

24. Additional revenue from Green Taxes – where should it go? Offset Individual income tax? Offset Corporate/business income tax? Offset Telecommunications tax? Other Recommendations? Offset Fed payroll tax?

25. GREEN TAX SHIFT OPTION 1 Offset Individual income tax -$429.5M Offset Corporate/business income tax -$55.5M Offset Telecommunications tax -$15M

26. PAYROLL vs INCOME TAX Income employee VT income tax FICA employee FICA employer Self- employed $10- $15K 0$956 $1912 $15- $20K $79$1340 2680 $25- $30K $633$2486 $4972 PAYROLL TAX MUCH MORE REGRESSIVE!

27. GREEN TAX SHIFT OPTION 2 -$500M Payroll tax <$35K income and pro-rate above Or cash refund

28. Energy taxes in Germany increased by 55 percent, additional increase in 2005 through truck toll FINANCIAL EFFECTS OF 1999 ETR IN GERMANY (IN BILLION EURO) Energy taxes 2003/2005 Energy taxes 18,7 bn = 55% in- crease Electricity (0 2,1 cents/kWh) 199 8 6,5 5,0 1,8 16,0 22,8 ~ 34 200 5 Road toll for trucks + 3,0 Fuel oil (4,1 6,2 cents/l) Diesel (31,7 47,2 cents/l) Petrol (50,1 65,6 cents/l) Natural gas (0,2 0,6 cents/kWh) ETR ~ 53 3,0 Road Toll (0 9-14 cents/km) ~ 56 Total green taxes almost 90 Bn (incl. tobacco, land etc.) 199 9 +4,3 200 0 +2,5 200 1 +3,0 200 2 +2,5 200 3 +4,3

29. Almost 90 Percent was recycled to citizens in order to reduce labour cost GERMAN ETR: RECYCLING OF THE RETURNS Decrease in pension costs = 16 Bn relief for employers, employees and pensioners Pension system Environment Projects Renewable Energies Less CO 2 in buildings Tax break bio-fuels Our Comment: Great idea, in principle Less than perfect execution Economy Govt. Social Security Budget use

30. First Results of Ecological Tax Reform POSITIVE EFFECTS ON NATURE, INNOVATION AND LABOUR Fuel consumption (-16%) CO 2 -emissions (2-2,5%) Pension costs (-16 bn) Costs for industry (-1 bn) Empty truck travel Imported fossil fuels (- 13%) Overall tax burden (-4 %) Tax share of Nature Car sharing (+70 %) Public transport (+5 %) Energy saving technologies Energy efficiency Gas-powered cars (x10) Bio-fuelled cars (x2) Job creation ( 250.000) Renewable energies Less More

31. More jobs in RENs than in our heavily subsidized problem energies Source: BEE 2005 Water Geothermal power Solar Bioenergy Windpower REN: 150.000 jobs JOBS IN THE ENERGY SECTOR IN GERMANY 2005 Problem energies: 107.000 jobs

32. 100% Green shift-OPTION 3 Carbon$300/ton Land9.6% Waste$2/bag Water1c/gal >100gals Chem product fee $300 on pesticides $2.6B revenue

33. Why should we?

34. .25% Financial speculation tax $269 Million Land bubble Credit default swaps Mortgage backed securities currency hedges options derivatives Exemptions IPOs, new stock Venture Capital Angel Investors Small business loans Etc. 95% Speculation (A NO BRAINER)