Vermont legislators are considering excise and sales taxes on fossil fuels for heating to fund weatherization upgrades for about 25 percent of Vermont homeowners. More than 80 percent of Vermont homeowners would be affected by the tax.
These are two of the key revenue-generating measures proposed in a new report by the 65-member Thermal Efficiency Task Force made up of lawmakers, lobbyists and various stakeholders. Many of the members support such taxes because of the massive savings they would reportedly bring and the 800 job-years, or years of a given job, they would create.
According to the 183-page report, every $1 of public investment would create more than $5 in benefits; and homeowners who invest in thermal efficiency upgrades could save roughly $1,000 a year.
Chris Recchia, commissioner of the Public Service Department, lauded the report.
“The task force did a tremendous job of looking at all of the issues and looked at a range of options,” he said. “There are over 100 recommendations in there of things that can be done.”
A state statute enacted in 2008 sets the goal of “substantially” improving the energy efficiency of 80,000 — or one quarter — of Vermont homes by 2020. The Public Service Department assembled the task force in 2012 to assess the state’s progress in meeting the goal and to draw up specific recommendations to guide the state’s energy efficiency actions over the next seven years.
The task force estimates that current programs — such as the Vermont Weatherization Assistance Program — are on track to upgrade 18,000 homes by 2014. At that rate, the state would fall short of its statutory goal by almost 40,000 homes come 2020. In order to meet the 80,000-home goal, the state would have to weatherize 62,000 homes over a six-year period — more than 10,000 units annually.
The task force calls for $267 million in new public funding on top of the $88.6 million already available through existing programs. The report says this move “will leverage $687 million in private-sector financing and investment,” as roughly $1 billion is necessary to achieve the goal.
The report finds that the state and its people could realize savings that range from $900 million to $2 billion, depending on how aggressively the recommendations are implemented. The report also proposes a tax credit for investors or homeowners who make energy efficiency improvements.
But the question remains: Where would this $267 million in public funding come from when the state is staring down the barrel of a $50 million to $70 million deficit next fiscal year?
Fuel taxes
The report’s No. 1 “high preference” for generating revenue to fund weatherization projects is an excise tax on fossil fuels — fuel oil, kerosene, propane and natural gas.
This proposed tax on more than 80 percent of Vermont homeowners would appear to run against the grain of Gov. Peter Shumlin’s repeated pledge not to raise “broad-based taxes.”
The tax would vary depending on the fuel type and whether it’s based on carbon dioxide emissions or energy output, measured in British thermal units. Although, at face value, the Btu tax varies in cents per gallon between fuels, the tax would end up relatively even, as it is adjusted based on the energy content of different fuels.
To raise $10 million annually for the program, excise taxes would range from 2.4 to 4.5 cents per gallon (of oil or propane) or therm (of natural gas); to raise $20 million, the excise taxes would be between 4.8 and 8.1 cents; and to raise $30 million would require excise taxes between 7.1 and 13.6 cents.
The task force’s “medium preference” revenue generators include an increase in the gross receipts tax on certain fuels and the removal of a sales tax exemption on heating fuels.
The gross receipts tax is currently set at 0.5 percent for the aforementioned fossil fuels as well as electricity and coal. This tax raised $7.9 million in 2011. The task force estimates that raising the tax to 1 percent would generate about $15.9 million annually; a 2 percent tax would raise an estimated $31.6 million.
Currently, the state does not impose a sales tax on residential fuels. By re-imposing the 6 percent statewide sales tax, which has been exempted since 1977, the task force estimates the state could raise roughly $65 million in annual revenues.
Matt Cota, director of the Vermont Fuel Dealers Association, was a member of the task force, and he has frequently criticized these tax proposals.
“There is an influential lobby in Montpelier that supports higher fuel prices by whatever means necessary as a way to make the fuel we sell unaffordable, thus forcing people to use less,” he said in a public statement. “This political philosophy is written by those that haven’t had the misfortune of living from paycheck to paycheck — or the responsibility of signing the front of one.”
Calais Rep. Janet Ancel, who chairs the House Ways and Means Committee, said she has “serious reservations” about taxing heating fuels, although she hasn’t had time to read the report. She plans to look at it later this week, when she meets with members of the task force.
Burlington Sen. Tim Ashe chairs the Senate Finance Committee, which met with members of the task force on Tuesday. He said in a separate interview that before talking about specific funding mechanisms, he wants to better understand the scope of the situation.
“I think the committee needs to first understand what the opportunities are for savings and how much we’re really throwing away,” he said. “If the report is correct that we send $600 million a year outside of state borders on heating fuel, then there’s a real opportunity to reduce the amount of money that’s leaving the state.”
Ashe said he is not convinced that Vermonters “appreciate the problem.”
“If we can’t educate (people) so they know that they’re throwing money literally out their windows and walls, then conversations about excise taxes or anything else become a moot point because there will be no political will to make something happen,” he said.
Montpelier Rep. Tony Klein, who chairs the House Natural Resources and Energy Committee, said that the Legislature’s focus should be on educating the public about the benefits of thermal efficiency improvements.
“There’s a rather tough job that needs to be done to communicate and educate all Vermonters (about) what it means to them; and that it is for them; and that they can participate in it; and if they do, the benefits that are promised by investing in it will occur,” he said. “If we can do that, and that should be our primary focus, then Vermonters will demand that these programs be implemented.”
Cota took issue with the idea that Vermonters who can afford their own weatherization upgrades should pay for those of others.
“My home is airtight. My home uses very little fuel, and I’m a lobbyist for the fuel companies,” he said. “What is my responsibility to pay for my neighbor who has not taken those steps?”
Recchia said that the whole of society bears the burden on this issue.
“We all pay for this one way or another,” he said. “We pay for the use of fuel that is inefficiently used. We pay for the carbon impacts of it. We pay for the transportation of it.
“I do think it’s fair to say there’s a societal interest in making sure we use resources as efficiently as we can,” he added. “Many of us are able to do that on our own, and there are others that need help with that.”
