blue ribbon tax commission dec. 8, 2009 revenue for a sustainable economy: green taxes, common...

BLUE RIBBON TAX COMMISSIONDec. 8, 2009

Revenue for a Sustainable Economy:Green Taxes, Common Assets, and Subsidy Reform

Gary Flomenhoft,Research Associate/Lecturer inPublic Administration,Community Development andApplied EconomicsGund Institute Fellow

Green TaxesMelissa BaileyThomas A. Benoit Sr.Amanda Dow DavisJohn DemeterCheryl L. DierschPeter M. Freeman Andrew JopeJohn MejiaRachel Marie Weston

Acknowledgements

Common AssetsRoss SaxtonMark KolonowskiBeth NolanColin McClungConor CaseyIan RaphaelWill MurrayElliot Wilkinson-RaySusan Skalka

Invitation: Rep. Dave Sharpe & Commission

Student Researchers

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

TAXES=THIRD RAIL OF POLITICS

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

GREEN ECONOMY?

PRICES

VT GREEN ECONOMY

Always cheaper to do the wrong thing.

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”

ECONOMY = THROUGHPUT

ECONOMY

LAND USE

DEPLETION POLLUTION

Purpose: Max GDP = max throughput = DUMB GROWTH!

(Value added)

(By K & L)

ECONOMY = THROUGHPUT

ECONOMY

LAND USE

DEPLETION POLLUTION

Purpose: max value added/ minimum throughput=SMART GROWTH!

(Value added)

(By K & L)

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

Survey-EU Green taxes

1999 VERMONT TAXES

VT Taxes 1999

TOTAL ENERGY

TOTAL AIR AND WATER

TOTAL WASTE

TOTAL PROPERTY

Personal Income

Estate Tax

Sales & Use

Meals & Rooms

Telephone PropertyTelecommunicationsCorporate Income

Bank Franchise

InsuranceBeverage

CigaretteTelephone Company

Captive Insurance

2000 VERMONT TAXES

VT taxes 2000

TOTAL ENERGY

TOTAL AIR AND WATER

TOTAL WASTE

TOTAL PROPERTY

Personal Income

Estate Tax

Sales & Use

Meals & Rooms

Corporate IncomeTelecommunications

Telephone Property

InsuranceCaptive Insurance

Beverage

CigaretteTelephone Company

Bank Franchise

2001 VERMONT TAXES

VT TAXES 2001

TOTAL ENERGY

TOTAL AIR AND WATER

TOTAL WASTE

TOTAL PROPERTY

Personal Income

Estate Tax

Sales & Use

Meals & Rooms

Telecommunications

Telephone Property

Corporate Income

InsuranceCaptive Insurance

Beverage

Telephone Company

Bank Franchise

Cigarette

2002 VERMONT TAXES

VT TAXES 2002

TOTAL ENERGY

TOTAL AIR AND WATER

TOTAL WASTE

TOTAL PROPERTY

Personal Income

Estate Tax

Sales & Use

Telecommunications

Meals & Rooms

Insurance

Telephone Company

Corporate Income

Beverage

CigaretteTelephone Property

Bank FranchiseCaptive Insurance

2003 VERMONT TAXES

VT TAXES-2003

TOTAL ENERGY

TOTAL AIR AND WATER

TOTAL WASTE

Personal Income

Estate Tax

Sales & Use

Meals & Rooms

Telecommunications

Telephone Property

InsuranceTelephone Company

Bank Franchise

Captive Insurance

TOTAL PROPERTY

BeverageCigarette

Tobacco Products

Corporate Income

2004 VERMONT TAXES

VT taxes-2004

TOTAL PROPERTY38%

Personal Income21%

Estate Tax1%

TOTAL ENERGY13%

TOTAL AIR AND WATER0%

TOTAL WASTE

Cigarette2%

Bank Franchise0%Telephone Company

0%

Telecommunications1%

Meals & Rooms5%

Sales & Use12%

TOTAL CHEMICALS

Beverage0%

Telephone Property0%

Corporate Income3%

Insurance1%

Captive Insurance1%

2008 VERMONT TAXESVT Taxes-2008

Sales & Use14%

Personal Income

Cigarette fee

slicquor

1%

Estate Tax1%

TOTAL PROPERTY34%

TOTAL ENERGY11%

Meals & Rooms5%

Captive Insurance

Insurance1%

Corporate Income3%

lottery

2004 VERMONT TAXES

VT taxes-2004

TOTAL PROPERTY38%

Personal Income21%

Estate Tax1%

TOTAL ENERGY13%

TOTAL AIR AND WATER0%

TOTAL WASTE

Cigarette2%

Bank Franchise0%Telephone Company

0%

Telecommunications1%

Meals & Rooms5%

Sales & Use12%

TOTAL CHEMICALS

Beverage0%

Telephone Property0%

Corporate Income3%

Insurance1%

Captive Insurance1%

2004 VERMONT TAXES: LAND&BLDGS

VT Taxes-2004

buildings-NICU24%

Other fees3%

Other general taxes1%

TOTAL AIR AND WATER0%

TOTAL WASTE

TOTAL CHEMICALS

Speculative Gains Tax0%

current use property0%land-NICU

11%

Cigarette2%

Captive Insurance1%

Sales & Use12%

Telecommunications1%

Insurance1%

TOTAL ENERGY12%

Estate Tax1%

Personal Income20%

Property Transfer Tax2%

Meals & Rooms5%

Corporate Income3%

2004 VERMONT GREEN TAXES

VT Taxes-2004

buildings-NICU

Other fees

Tobacco ProductsOther general taxes

TOTAL AIR AND WATER

TOTAL WASTE

TOTAL CHEMICALSSpeculative Gains Tax

current use property

land-NICU

CigaretteBeverageCaptive Insurance

Sales & Use

Telecommunications

Telephone Company

Bank Franchise

Insurance

TOTAL ENERGY

Estate Tax

Personal Income

Property Transfer Tax

Meals & Rooms

Corporate Income

Telephone Property

GREEN TAX CRITERIA

1. ECONOMIC EFFICIENCY2. DISTRIBUTIVE EQUITY3. ENVIRONMENTAL PROTECTION4. EASE OF ADMINISTRATION

Tax Commission Mandate1. Sustainability2. Appropriateness3. EquityMinimize regressivity-minimize tax on LIFair, efficient, effective administration

GREEN TAX NEW REVENUE

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?

GREEN TAX SHIFT OPTION 1

VT Taxes-2004 REVISED

buildings-NICU

Other fees

TOTAL AIR AND WATER

TOTAL WASTE

TOTAL CHEMICALS

Speculative Gains Tax

current use property

land-NICU

Other general taxesTobacco Products

Cigarette

Meals & Rooms

Telephone Company

Insurance

Captive Insurance

Beverage

TOTAL ENERGY

Sales & Use

Estate Tax

Property Transfer Tax

Telecommunications

Telephone Property

Bank Franchise

•Offset Individual income tax -$429.5M•Offset Corporate/business income tax -$55.5M•Offset Telecommunications tax -$15M

PAYROLL vs INCOME TAX

Income employee

VT income

tax

FICA employee

FICA employer

Self-employed

$10-$15K

0 $956 $956 $1912

$15-$20K

$79 $1340 $1340 2680

$25-$30K

$633 $2486 $2486 $4972

PAYROLL TAX MUCH MORE REGRESSIVE!

GREEN TAX SHIFT OPTION 2

VT Taxes+FPT 2004 REVISED

Other fees

buildings-NICU

Tobacco Products

Other general taxes

TOTAL AIR AND WATER

TOTAL WASTE

TOTAL CHEMICALS

Speculative Gains Tax

current use property

land-NICU

CigaretteBeverage

Captive Insurance

Sales & Use

Telecommunications

Telephone CompanyBank Franchise

Insurance

TOTAL ENERGY

Estate Tax

Personal Income

Property Transfer Tax

Meals & Rooms

Corporate Income

Telephone Property

-$500M Payroll tax <$35K income and pro-rate above

Or cash refund

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)

1998

6,5

5,0

1,8

16,0

22,8~ 34

2005

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.)

1999

+4,3

2000

+2,5

2001

+3,0

2002

+2,5

2003

+4,3

Almost 90 Percent was recycled to citizens in order to reduce labour cost

GERMAN ETR: RECYCLING OF THE RETURNS

89%

2%9%

Decrease in pension costs = 16 Bn relief for employers, employees and pensioners

Pension system

Environment Projects • Renewable

Energies• Less CO2 in

buildings• Tax break bio-fuels

Our Comment:

• Great idea, in principle

• Less than perfect execution

Economy

Govt.

Social Security

Budget use

First Results of Ecological Tax Reform

POSITIVE EFFECTS ON NATURE, INNOVATION AND LABOUR

Fuel consumption (-16%)CO2-emissions (2-2,5%)Pension costs (-16 bn)Costs for industry (-1 bn)Empty truck travelImported fossil fuels (-

13%)Overall tax burden (-4 %)

Tax share of NatureCar sharing (+70 %)Public transport (+5 %)Energy saving

technologiesEnergy efficiencyGas-powered cars (x10)Bio-fuelled cars (x2)Job creation (≈ 250.000)Renewable energies

Less

More

More jobs in RENs than in our heavily subsidized problem energies

25000

50.000

20000

10000

64.00044000 38000

6000

Renewable Energy coal nuclear power lignite Source: BEE 2005

WaterGeothermal powerSolar

Bioenergy

Windpower

REN: 150.000 jobs

JOBS IN THE ENERGY SECTOR IN GERMANY 2005

Problem energies: 107.000 jobs

100% Green shift-OPTION 3Carbon $300/ton

Land 9.6%

Waste $2/bag

Water 1c/gal

>100gals

Chem

product fee

$300 on pesticides

$2.6B revenue

2004-100% GREEN

TOTAL ENERGY36.0%

land 54.5%

TOTAL WASTE5.9%TOTAL CHEMICALS

0.1%

TOTAL AIR AND WATER3.5%

Why should we?

.25% Financial speculation tax

$269 Million

Land bubble

Credit default swaps

Mortgage backed securities currency

hedges options

derivativesExemptionsIPOs, new stockVenture CapitalAngel InvestorsSmall business loansEtc.

95% Speculation

(A NO BRAINER)