By Milt Eaton
Daniel Webster, the 19th century senator from New Hampshire, argued before the U.S. Supreme Court “the power to tax is the power to destroy.” Responding to an attempt by one or more states to tax an entity out of existence, the renowned orator sounded a cautionary note that the Governor and Legislature of Vermont would do well to consider.
The current target for extinction by taxation is, of course, Vermont Yankee. Today the state’s largest electrical power plant pays $5 million annually in a “generation tax” negotiated as a long-term agreement when they purchased Vermont Yankee, and in the process, rescued Vermont utilities from financial ruin. Having failed last fall to close the plant by interfering in the regulatory process, the Legislature now wants to tax the golden goose out of existence with a unilateral increase of their generation taxes to a whopping $12,500.000.00 per year.
The rationale for such a reckless increase fails examination. Some legislators are saying the proposed “generation tax” increase merely replaces the Clean Energy Development Fund (CDEF) allocation. In fact, that originally negotiated payment was the result of a three-way negotiation, which resulted in a memorandum of understanding (MOU), with an agreed-upon cap on the total amount of payments.
Punitive taxation is not in the State’s best interest. If Vermont has learned anything from its failure in federal court, it is that the strategy of “one set of rules for Vermont Yankee and fair play for everyone else” will not bear judicial or market scrutiny. Such a policy is feckless, expensive and not befitting of the Green Mountain State. Even Assistant Attorney General Scott Kline warned the Senate that this tax increase exposes the State to legal risk.
Second, like many poorly conceived plans, there will be unintended consequences. Such an obvious overreach will distress other Vermont businesses. Indeed, this kind of legislation sends out a clear message that Vermont’s government is hostile to business.
Trust in fair, impartial dealing in public policy is vital to attracting and retaining businesses, which create good jobs. Employers have to believe that Vermont is a place where they can get a square deal and won’t be unfairly treated based on the political winds of the day. During this year’s legislative debate on this tax, questions surfaced about the administration of the CEDF, including allegations that one renewable energy developer gained millions of dollars in grants from a bid system that he helped design and originate. There have been other charges that large sums have been spent, not to develop new sources of clean energy in Vermont, but to subsidize the purchase of expensive home solar systems by high-income Vermonters.
It might be time for an impartial audit of the CEDF, perhaps by a neutral third party or by the Vermont State Auditor. It could lay the facts out for all Vermonters and settle any question of self-dealing.
Selective, punitive taxation is bad policy with negative consequences on job growth that poisons the well of cooperation between government and the private sector essential to growing our economy.
Ultimately, we all lose when the taxpayer and voter is left holding the bill.