McClaughry: The disappearing reappearing carbon tax

By John McClaughry

On Feb. 10, VTDigger political columnist Jon Margolis declared that “the carbon tax is dead.” The Democratic leaders of the House and Senate have pretty clearly said “not this year,” and Gov. Phil Scott has repeatedly promised a veto. Margolis wondered why the carbon tax opponents were so unwilling to declare victory, and move on.

John McClaughry

John McClaughry is vice president of the Ethan Allen Institute.

Of course, the carbon tax (aka fee, charge or pricing) is not dead. Two House bills have since been introduced to impose 40 and 50 cents per gallon tax increases on motor fuel to fight climate change. True, they probably won’t be considered, but as will be seen, the issue has far from gone away.

The “Energy Independent Vermont” coalition’s sweeping carbon tax bill of 2016 disappeared, along with three of its sponsors in that year’s election. The ESSEX Plan of 2017 likewise disappeared. The best the carbon tax advocates could do in 2018 was get a $120,000 taxpayer-financed study of “decarbonization.”

That study arrived in February. From the standpoint of carbon tax enthusiasts, it must have been a serious downer. It found that even with a carbon tax almost twice that called for in the ESSEX Plan, bringing in up to $433 million a year, Vermont would have almost no hope of meeting its 2005 carbon dioxide emissions goals; economic welfare would be reduced, a situation the study tried to salvage by positing dubious climate benefits occurring in Africa and Asia; and the most likely “significant impact” would be “if Vermont’s policy leadership were to inspire increased leadership and policy innovation in other states or nations.”

The only ray of hope the study identified was blending a “moderate” carbon tax and “non-pricing policy approaches.”

The Regulatory Assistance Project, a consulting organization headed by former PUC Chairman Richard Cowart, rushed to grasp at this straw. It obtained a small grant from the Joint Fiscal Office to “review” the decarbonization study. That evolved into a slide show presented to the House Appropriations Committee on Feb. 28. That presentation had very little to do with the $120,000 study. Instead it argued for an alternative: “energy savings through low-cost carbon management.”

Until now, the carbon taxers’ strategy was to impose an increasingly burdensome tax on gasoline, diesel, heating oil, natural gas and propane to depress Vermonters’ use of those fuels and switch to something else. Cowart’s alternative begins with spending, not taxing.

The approved spending includes weatherizing drafty oil- and gas-heated homes, replacing furnaces with cold climate heat pumps, switching schools to wood pellet heat, improving building energy efficiency, expanding public transit, and more subsidies and charging stations to induce motorists to swap their gas and diesel-powered rides for electric vehicles.

Most Vermonters probably see some merit in weatherizing, efficiency and, for paved-road urbanites, electric vehicles. People wisely invest their own money into weatherization and energy efficiency that promises a reasonable payback. Others choose to switch to already-subsidized electric vehicles. But that’s far from enough to make a dent in “climate pollution.”

The Cowart review recommends $600 million in “public investment in building and heating strategies” over the next ten years. It also asks for $70 million over 12 years for light duty EV subsidies. That’s pocket change compared to the expected taxpayer price tag for the Energy Action Network’s goal of subsidizing EVs to get from the 2,985 on the road today to 90,000 six years from now.

But now, with the carbon tax supposedly off the table, where is the state supposed to find the hundreds of millions of dollars needed to pay for all these subsidies, incentives, “investments” and “carbon management” plans?

Now comes the moment of truth. The two state retirement funds are now facing $4.5 billion in unfunded liabilities. Medicaid is demanding ever more millions of budget dollars. Highway and bridge maintenance is falling further behind. There is no school property tax relief on the horizon. How are we supposed to find $60 million or more a year for ten years to pay for all this new stuff?

Cowart boldly faced up to this important (implied) question. “Carbon revenue is required,” he told the Committee. “In my opinion, we should be using carbon revenues to pay for a carbon reduction program.”

Carbon revenues? Bingo! The carbon tax! The tax we just agreed to forget because of the widespread opposition, its adverse economic effects and its futility in combating climate change.

This is what passes for policy genius among the climate change establishment. More practical Vermonters aren’t going to buy it.

John McClaughry is vice president of the Ethan Allen Institute.

Images courtesy of Bruce Parker/TNR and John McClaughry

6 thoughts on “McClaughry: The disappearing reappearing carbon tax

  1. The people of the state have a voice in having a carbon tax and i thing it should be put to a vote. We have the right to have make this big a decision when we have underfunded liabilities.

  2. For at least the last two years the collective group 350 Vermont has been trying to rally grassroots support for such policy.But is it appropriate for 350 Vermont Climate Solution Resolutions to imply crisis that inspirer’s government action against our free market economic system?

    This tactic employs the use of extreme urgency as justification for confiscation of property and wealth of private citizens to advantage a cause deemed imminent, but are there punitive dangers lurking in this approach?

    These seemingly self-righteous demands seek to impose their will by force of governance and have unmasked this group as being opposed to the principles of freedom and fair play most Americans and Vermonters hold dear.

    What qualifies these ideas that cannot yet compete fairly in the market place for preferential legal status over our current energy economy?

    Between non-government groups that lobby our legislators and organizations that solicit grass roots support at town meetings we are distracted by the vise of good intentions. Yet this alliance of top down government and grass roots activism is merely a strategy paid for by relinquishing more freedom and property to a lower standard of living, though, difficult for some to see when invested in a cause.

    We should remember America has accomplished far more through the incentive of free market enterprise than any Socialist country has through force or confiscation of property from its people!
    Let groups who wish to realize the dreams and goals of their design do so in the private sector where they must compete honestly on their own merits.

    Our legislators are being heavily lobbied to include these schemes of energy crisis in Act 250 revisions this year; the question is will they choose forced compliance by statute, or honor principles of liberty and freedom for all individuals when confronting these issues?
    The choice comes down to forced outcomes encouraged by collective groups or free enterprise if legislators remember their responsibility to all individuals!

  3. These guys are like a pit bull with a bone. Once they get this carbon tax charade in their collective teeth, they won’t let go. They could care less about what the folks want. It’s their way or the highway. And we keep elected them??????????????

  4. “Until now, the carbon taxers’ strategy was to impose an increasingly burdensome tax on gasoline, diesel, heating oil, natural gas and propane to depress Vermonters’ use of those fuels and switch to something else.”

    The Vermont Comprehensive Energy Plan, CEP, goal aims to “transform” the Vermont economy. It would require investments of about $33.3 billion, about $1 billion per year for 33 years, during the 2017 – 2050 period, per Vermont Energy Action Network 2015 Annual Report. The CEP could not be implemented without a very high carbon tax and other taxes, surcharges and fees of at least $970 million per year for 33 years.

    Carbon Tax Impact On A Typical Vermont Family, as reported on VTDigger:

    Any tax, including a carbon tax, passing through the hands of government suffers from “the sticky fingers syndrome”, 2 dollars go in about 1.5 dollars come out. The difference stays to feed the growing government bureaucracy.

    The key word missing in most discussions is UNILATERAL. VT’s government imposing on Vermonters a unilateral carbon tax is like shooting them in the feet.

    If the carbon tax were nationwide, I would support it.

    The carbon tax would:

    – Impose a $10/ton tax of carbon emitted in 2017, increasing to $100/ton in 2027.
    – Generate about $100 million in state revenue in 2019, about $520 million in 2027.
    – Be added to the fuel prices at gas stations and fuel oil/propane dealers.
    – Drivers should expect a tax increase of 9 c/gal of gasoline in 2018, increasing to about 89 cents in 2027.
    – Homeowners, schools, hospitals, businesses, etc., should expect a tax increase of 58 c/gal of propane and $1.02/gal of heating oil and diesel fuel in 2027.
    – A typical household (two wage earners, two cars, in a free-standing house) would pay additional taxes in 2027 of about:
    – Some of the carbon tax extortion would be at the pump, some when the monthly fuel bills arrive, and some as higher prices of OTHER goods and services.

    Driving = $0.89/gal x 2 x 12000 miles/y x 1/(30 miles/gal) = $712/y
    Heating = $1.02/gal x 800 gal/y = $816/y
    Total carbon tax in 2027 = $1528/y
    Sales tax reduction 5/6 x 1400 = $233/y
    Net tax increase = $1295/y

    – The hypocritical sop of reducing the sales tax from 6 to 5 percent would save that household about $233 in sales taxes, for a net loss of $1295 in 2027. That means such households, the backbone of the Vermont economy, would have about $1300/y less to make ends meet.
    – Many of these households have had stagnant or declining, spendable real incomes (after taxes, fees, surcharges; other recurring expenses, etc.), plus dealing with a near-zero, real-growth Vermont economy, since 2000.
    – With less real income, and higher real prices for goods and services, they also would have to make their own energy efficiency improvements.

  5. I have an ideal for the brainless trust in the legislature, Lets have a non mandatory
    carbon tax. All the leftarded ijiots that vote in leftarded taxacrates can pay in to alleviate
    their feelz bad because of gorebull warming. This would show the flatlander legislature
    how much need there is for this by the total $ they receive.

    I would bet dollars to donuts there wouldn’t be much in the warming coffer..

    • Exactly. Same goes for income tax. MA has a voluntary higher rate a taxpayer can pay. Implement that and all of your progressives can pay the higher rate for the common good. They get to sleep well at night knowing they have done their part, while the other folks can pay the lower rate. They, also, can sleep well at night knowing they still have some of their hard earned money. Revenues will increase some and everyone’s happy. Right?

      But, as with the carbon tax the Left screaming for “tax the rich” want nothing more then to take control of the lives of the folks that voted for them and make them dependents of the state. Locking in their re-election term after term.

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