Editor’s note: This commentary is by John Greenberg, who owns and runs The Bear Bookshop in Marlboro. He has worked on energy issues in Vermont for over 30 years.
[S]o far, much of Vermont’s debate about carbon taxes has focused on a general dislike of taxes, a desire to pay less, or on unachievable notions of “fairness.” Here I hope to refocus the discussion on the real issues by situating carbon taxes within Vermont’s bigger taxation picture.
Start with this: No one likes taxes. But representative governments require revenue to fund whatever spending we as a polity determine we want.
How a government taxes is a totally different question from the one that carbon tax opponents most commonly use to muddy the waters: namely, how much it taxes. Given that Vermont requires (by custom, if not by law) a balanced budget, that decision is made by choosing how much to spend. Setting that amount – which has nothing to do with the carbon tax question – determines how much tax revenue will be required.
Deciding whether to impose a carbon tax will have no impact on the amount of revenues the state needs to raise one way or another. If our spending requires more tax revenues than we now raise and we don’t pass a carbon tax, we will get the revenues from other sources. If carbon taxes are implemented to replace some of the current sources of revenue, the rates of those sources can decline if we spend less, or remain the same if we spend more.
None of this changes the issue we should be debating: namely, the best way to raise the revenues we require.
All taxes necessarily involve redistribution of income from individuals (and businesses) to the state. That’s what taxes do. Moreover, different taxes impact differently situated individuals differently. If, for example, we lower the property tax and raise the income tax while holding the total amount of revenue constant, some individuals will win, others will lose, and still others will remain essentially in the same position. Choosing one tax over another always favors some individuals over others: that comes with the territory. Put differently, choosing what to tax necessarily implies winners and losers.
Most Americans accept the basic fairness of graduated income taxes which is why they’ve endured so long: The fairest taxes are those that impose the greatest burdens on those who can best afford to pay them and the smallest burdens on those who can least afford them.
Based on the fact that our income tax is progressive, many Vermonters believe that Vermont’s tax scheme as a whole is too. But that’s not so. Indeed, when property, sales and other taxes are included alongside income taxes, Vermont’s middle class residents pay the highest percentage of their income in taxes, while the highest income earners pay the least. (Who Pays report, p. 124)
We can and should rectify this. So if we add a carbon tax to the mix (while holding the overall amount collected the same), we should also modify the overall tax scheme to achieve greater equity, thus improving life for the overwhelming majority of Vermonters at the same time.
We can no longer afford to give the highest income earners a free ride while the majority of Vermonters bear the highest burdens. We should, in short, make the whole system fair by making it progressive.
Lastly, we need to keep in mind one other basic notion about taxation in general: namely, as John Marshall put it: “the power to tax involves the power to destroy.” As a society, we’ve accepted that notion by imposing heavy taxes on cigarettes and alcohol, but we also tax income, property, and most sales. No one wants to eliminate those.
In sum, it’s wisest to tax those things we want least to preserve, and do so in accordance with the principles of fairness around which a longstanding social consensus has formed. Carbon taxes, done right, represent an opportunity to do both.
Fossil fuels are a perfect candidate for “death by taxation:” burning them poisons both people and the earth. Even absent anthropogenic global warming, fossil fuel production and burning pollutes water (leaks, chemical pollution, coal ash, etc.), air (leaks, off-gassing from burning, refining, etc.), and earth (toxic fracking materials; mountaintop removal, etc.)
We must not go on destroying our only planet in the misguided name of our “need” to do so. Our ancestors lived in this state for more than a century without “needing” fossil fuels. If they could, surely we can. Our descendents may have no choice in the matter. For their sake, we need to find every means possible to reduce fossil fuel use. Carbon taxes are just one of those means.
This is an excellent time to tax fossil fuels, since substitutes are often available and more, better and cheaper substitutes will become available as the price of these fuels rises and inspires more technological creativity. Also, the now-global understanding of the threat of warming means that many other polities, possibly including our neighboring states, are moving in the same direction.
