Energy & Environment

House tax committee votes to double heating fuel tax to fund weatherization

Jim Masland

Rep. Jim Masland, D-Thetford Center, member of the House Ways and Means Committee. File photo by Roger Crowley/VTDigger

In a move to increase funding for low-income home weatherization, the House Ways and Means Committee Wednesday approved a 2 cent per gallon hike of the tax on heating fuel.

Lawmakers on the committee voted 6-5 Wednesday to double the tax on fuels including heating oil, propane, kerosene and dyed diesel to 4 cents per gallon.

The bill also increases the fuel gross receipts tax — a retail sales tax that also funds the weatherization program — from 0.75 percent to 1 percent for natural gas and 1.5 percent for coal.

Environmental and low income advocates support the increased funding for weatherization, and say it will cut heating costs for participants and reduce greenhouse gas emissions. But some legislators, members of the business community and Gov. Phil Scott expressed concerns about increased heating costs.

The House’s tax committee began debating the heating fuel tax as part of a broader discussion on a major tax bill to clarify who was — and was not — exempt from paying it.

Rep. James Masland, D-Thetford, proposed an amendment this week to increase the taxes after hearing testimony from a government adviser, the Regulatory Assistance Project, which recently completed a report on carbon reduction policies for Vermont.

“They made a very convincing case that if we’re concerned about CO2, substantially increasing weatherization will be more effective in reducing carbon emissions than a carbon tax,” he said in an interview Wednesday.

The state’s weatherization program provides home audits and energy efficiency retrofits — such as insulation, air sealing and heating unit upgrades — free of charge for Vermonters who make at or below 80 percent of median household income. The program has weatherized 7,692 homes in the past seven years, according to the Office of Economic Opportunity, a part of the Agency of Human Services, which administers the program.

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The 2 cent increase would generate around $4.6 million in additional revenue for low-income weatherization in fiscal year 2020, according to the Joint Fiscal Office. Geoff Wilcox, weatherization program administrator for the state, said that $500,000 weatherizes around 45 homes — meaning over 400 additional homes would be weatherized if the bill passes.

Fuel delivery

Home heating oil delivery. Photo courtesy Vermont Fuel Dealers Association

As it stands, H.439 is not likely to win the governor’s approval. Doug Farnham, an analyst with the Vermont Department of Taxes, told the committee the administration feels the tax increases are regressive.

Karen Lafayette, of the Vermont Low Income Advocacy Council, said her organization supports the proposed tax increase. Weatherization lowers energy costs and greenhouse gas emissions, improves health and provides work for local businesses that are paid to do efficiency work, she said.

“We think certainly the benefits of the program outweigh what would be any additional cost burden,” she said, adding that the 2 cent tax hike would increase heating costs by around $15 a year for the average household that uses heating oil.

But committee members were divided on the proposal.

Rep. Scott Beck, R-St. Johnsbury, said the bill, which contains a “policy decision,” should have been vetted by the House Energy and Technology Committee instead of heading straight to the tax committee.

“Not knowing whether the (weatherization) fund’s even working correctly now as it is, I didn’t think it was a good idea just to double it,” he said.

Scott Beck

Rep. Scott Beck, R-St. Johnsbury. Photo by Colin Meyn/VTDigger

Warren Coleman, a lobbyist for MMR, testified on behalf of Omya, a Swiss company that manufactures calcium carbonate in Rutland County, against the proposed increase to the natural gas gross receipts tax.

Coleman told the committee that Omya, the state’s second largest energy user, had invested nearly $10 million in the first liquified natural gas storage facility in Vermont to move away from diesel fuel, which improved its air emissions. He said Omya feels the the proposed tax increase would penalize companies that move away from dirtier fuels.

The committee is also debating whether to exempt nonprofits, municipalities, and state and federal governments from paying the fuel tax.

Since 2016, these entities haven’t had to pay the levy, after legislators modified fuel tax laws.

But some lawmakers are considering lifting the exemption and say they had never intended to exempt local state and federal governments, who previously paid a levy on fuel through a gross receipts tax. The committee will vote on the exemptions Friday.

Xander Landen contributed reporting.

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Elizabeth Gribkoff

About Elizabeth

Elizabeth Gribkoff is VTDigger's energy and environment reporter. She graduated from UVM's Environmental Studies program in 2013, receiving departmental honors for her thesis on women's farming networks in Chile and Vermont. Since graduating, Elizabeth has worked in conservation and sustainable agriculture. Most recently, she was a newsroom and reporting intern with VTDigger.

Email: [email protected]

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