Legislators pushing to reduce or replace existing taxes with a levy on carbon dioxide pollution are pitching the idea as tax relief to residents and a boon to in-state businesses, while the governor panned it as increasing the cost of living.
Four lawmakers submitted skeletal bills Tuesday proposing various scenarios, but all would tax carbon emissions, a contributor to climate change. Each of the bills would be revenue-neutral, their sponsors say, meaning they wouldn’t bring in more than the taxes they would replace already do.
One of the bills would eliminate the state sales tax. Another would return the proceeds of the carbon tax to Vermonters through regular dividend checks paying everyone the same amount. A third would slash property taxes. The fourth would halve the income tax rate for the lowest tax bracket — to 1.75 percent — and double the earned income tax credit for 40,000 Vermonters. It would also eliminate income tax for businesses taking in less than $400,000 a year.
Gov. Phil Scott said the proposals would increase the cost of living for all Vermonters.
“To grow our economy, we must focus on policies and initiatives that make Vermont more affordable and encourage growth through smart policy and incentives, rather than discouraging growth through taxes, fees and onerous mandates from Montpelier,” Scott said in a statement emailed by his spokeswoman, Rebecca Kelley.
Scott has already sought to address environmental issues with a proposed sales tax holiday on electric vehicles and certain energy-efficient products, Kelley wrote. Scott proposed in his budget this year a two-week holiday on sales taxes on hybrid and electric vehicles.
Another opponent denounced the proposed taxes as a scheme to redistribute money.
“Obviously we’d need to see the details of these plans … but really a wealth redistribution scheme doesn’t seem like the way to jump-start the economy,” said Rob Roper, president of the free-market group the Ethan Allen Institute.
Taxes in general are a form of wealth redistribution, Roper said, but he characterized this as different in that the taxes Vermont now has in place pay for public services.
Legislators behind the bills have not proposed spending the carbon tax revenues any differently than the revenues from the taxes they would replace. The four sponsors are Reps. Diana Gonzalez, P/D-Winooski, Johannah Donovan, D-Burlington, Sarah Copeland Hanzas, D-Bradford, and Martin LaLonde, D-South Burlington.
Roper said the climate appears to be changing and that humans are likely to have contributed to that phenomenon. But he said a carbon tax is the wrong response.
“My proposed solution is to let the free market deal with it,” Roper said.
He said the United States and Europe have done an exemplary job of addressing global climate change using the free market.
Of the European Union’s 28 countries, 14 have carbon taxes in place already, said Vermont Law School professor Janet Milne, who is director of the Environmental Tax Law Institute.
Vermonters should allow the market to develop technological solutions to climate change, Roper said, and instituting a carbon tax would disrupt the economic forces that would accomplish this.
But the bills’ sponsors say they’d be a boon to in-state businesses.
Eliminating the sales tax would give Vermont businesses an edge against competitors on the internet and in sales-tax-free New Hampshire, said Copeland Hanzas.
“If we want to give an advantage to downtown and border communities … we really ought to think about finding a different source of (tax) income so we can ratchet down that sales tax,” she said in a news conference Tuesday afternoon.
“Where do we want to stimulate the economy? I’d say we want to stimulate the bricks and mortar (businesses) and Main Street,” Copeland Hanzas said in an interview. “If you talk to downtown retailers … it doesn’t take long to recognize that spending money in downtown shops keeps it in the neighborhood. Sending it to Exxon Mobil does not.”
“Let’s open it up and have a conversation,” she said. “Let’s ask downtown retailers how they would like to have people come in and shop tax-free.”
Copeland Hanzas’ bill, and the other three carbon tax proposals, exist only in short form, meaning they identify what end result sponsors are seeking, but they still require various committees to flesh out the details, the sponsors said Tuesday.
Democrats panned the governor’s treatment of the issue of climate change and accused Scott and his party’s leadership of blocking honest discussion of the subject.
“What’s interesting is that the governor claims to be on track for 90 percent renewable energy in 2050 … and we have yet to see any tangible results come out of that office that actually address climate change,” said the executive director of the Vermont Democratic Party, Conor Casey.
“I believe the Republicans have created a dishonest narrative on some of the ways we can address climate change,” Casey said. “Is carbon pricing the be-all, end-all? No. There are going to have to be a million ideas considered to address what may be the biggest crisis facing us. But the fact is, it deserves a day in court.”