BLUE RIBBON TAX COMMISSION Dec. 8, 2009 Revenue for a Sustainable Economy:
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BLUE RIBBON TAX COMMISSION Dec. 8, 2009 Revenue for a Sustainable Economy: Green Taxes, Common Assets, and Subsidy Reform Gary Flomenhoft, Research Associate/Lecturer in Public Administration, Community Development and Applied Economics Gund Institute Fellow Acknowledgements Student Researchers Green Taxes Melissa Bailey Thomas A. Benoit Sr. Amanda Dow Davis John Demeter Cheryl L. Diersch Peter M. Freeman Andrew Jope John Mejia Rachel Marie Weston Common Assets Ross Saxton Mark Kolonowski Beth Nolan Colin McClung Conor Casey Ian Raphael Will Murray Elliot Wilkinson-Ray Susan Skalka Invitation: Rep. Dave Sharpe & Commission 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 (Value added) ECONOMY (By K & L) POLLUTION DEPLETION LAND USE Purpose: Max GDP = max throughput = DUMB GROWTH! ECONOMY = THROUGHPUT (Value added) ECONOMY (By K & L) POLLUTION DEPLETION LAND USE Purpose: max value added/ minimum throughput=SMART GROWTH! 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 Captive Insurance Insurance Beverage Bank Franchise Telephone Company Telephone Property Telecommunications Corporate Income Meals & Rooms VT Taxes 1999 Cigarette TOTAL ENERGY TOTAL AIR AND WATER TOTAL WASTE Sales & Use Estate Tax Personal Income TOTAL PROPERTY 2000 VERMONT TAXES Captive Insurance Bank Franchise Telephone Company Telephone Property Telecommunications Corporate Income Meals & Rooms Insurance VT taxes 2000 Beverage Cigarette TOTAL ENERGY TOTAL AIR AND WATER TOTAL WASTE Sales & Use Estate Tax TOTAL PROPERTY Personal Income 2001 VERMONT TAXES Bank Franchise Telephone Company Telephone Property Telecommunications Corporate Income Meals & Rooms Captive Insurance Insurance Beverage VT TAXES 2001 Cigarette TOTAL ENERGY TOTAL AIR AND WATER TOTAL WASTE Sales & Use Estate Tax TOTAL PROPERTY Personal Income 2002 VERMONT TAXES Insurance Bank Franchise Telephone Company Telephone Property Captive Insurance VT TAXES 2002 Beverage Cigarette Telecommunications Corporate Income Meals & Rooms TOTAL ENERGY TOTAL AIR AND WATER TOTAL WASTE Sales & Use Estate Tax TOTAL PROPERTY Personal Income 2003 VERMONT TAXES Insurance Captive InsuranceBeverage Telephone Company Cigarette Bank Franchise Tobacco Products Telephone Property Telecommunications Corporate Income Meals & Rooms VT TAXES-2003 TOTAL ENERGY TOTAL AIR AND WATER TOTAL WASTE Sales & Use Estate Tax TOTAL PROPERTY Personal Income 2004 VERMONT TAXES Insurance Captive Insurance Beverage 0% 1% 1% Bank Franchise Cigarette Telephone Company 0% 2% Telephone0% Property 0% Telecommunications 1% TOTAL ENERGY 13% VT taxes-2004 TOTAL AIR AND WATER 0% TOTAL WASTE Corporate Income 3% Meals & Rooms 5% TOTAL CHEMICALS Sales & Use 12% Estate Tax 1% TOTAL PROPERTY 38% Personal Income 21% 2008 VERMONT TAXES Captive Insurance VT Taxes-2008 Cigarett e Insurance 1% licquor 1% fee s lotte ry TOTAL ENERGY 11% Corporate Income 3% Meals & Rooms 5% Sales & Use 14% TOTAL PROPERTY 34% Estate Tax 1% Personal Income 2004 VERMONT TAXES Insurance Captive Insurance Beverage 0% 1% 1% Bank Franchise Cigarette Telephone Company 0% 2% Telephone0% Property 0% Telecommunications 1% TOTAL ENERGY 13% VT taxes-2004 TOTAL AIR AND WATER 0% TOTAL WASTE Corporate Income 3% Meals & Rooms 5% TOTAL CHEMICALS Sales & Use 12% Estate Tax 1% TOTAL PROPERTY 38% Personal Income 21% 2004 VERMONT TAXES: LAND&BLDGS VT Taxes-2004 Other general taxes 1% Captive Insurance 1% Insurance 1% Cigarette 2% Other fees 3% TOTAL ENERGY 12% Speculative Gains Tax 0% TOTAL WASTE TOTAL AIR AND WATER 0% TOTAL CHEMICALS Telecommunications 1% Corporate Income 3% Meals & Rooms 5% land-NICU 11% Sales & Use 12% Estate Tax 1% buildings-NICU 24% Personal Income 20% Property Transfer Tax 2% current use property 0% 2004 VERMONT GREEN TAXES Captive Insurance Insurance Telephone Company Beverage Cigarette Tobacco Products Other general taxes VT Taxes-2004 TOTAL WASTE Other fees Bank Franchise TOTAL ENERGY TOTAL AIR AND WATER TOTAL CHEMICALS Speculative Gains Tax Telephone Property Telecommunications current use property Corporate Income land-NICU Meals & Rooms Sales & Use Estate Tax buildings-NICU Personal Income Property Transfer Tax GREEN TAX CRITERIA 1. ECONOMIC EFFICIENCY 2. DISTRIBUTIVE EQUITY 3. ENVIRONMENTAL PROTECTION 4. EASE OF ADMINISTRATION Tax Commission Mandate 1. Sustainability 2. Appropriateness 3. Equity Minimize regressivity-minimize tax on LI Fair, 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 Beverage Captive Insurance Insurance Bank Franchise Telephone Company Cigarette VT Taxes-2004 REVISED Tobacco Products Other general taxes Other fees Telephone Property TOTAL ENERGY Telecommunications Meals & Rooms Sales & Use TOTAL AIR AND WATER Estate Tax Property Transfer Tax TOTAL WASTE buildings-NICU TOTAL CHEMICALS Speculative Gains Tax current use property land-NICU •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 0 FICA employee $956 $956 $1912 $15$20K $79 $1340 $1340 2680 $25$30K $633 $2486 $2486 $4972 $10$15K FICA Selfemployer employed PAYROLL TAX MUCH MORE REGRESSIVE! GREEN TAX SHIFT OPTION 2 Captive Insurance Insurance Beverage Cigarette VT Taxes+FPT 2004 REVISED Tobacco Products Bank Franchise Telephone Company Other general taxes Other fees Telephone Property TOTAL ENERGY Telecommunications Corporate Income TOTAL AIR AND WATER Meals & Rooms Sales & Use TOTAL WASTE Estate Tax TOTAL CHEMICALS Speculative Gains Tax Personal Income current use property land-NICU Property Transfer Tax buildings-NICU -$500M Payroll tax <$35K income and pro-rate above Or cash refund FINANCIAL EFFECTS OF 1999 ETR IN GERMANY (IN BILLION EURO) Energy taxes in Germany increased by 55 percent, additional increase in 2005 through truck toll ~ 56 ~ 53 200 3 200 +4,3 +2,5 +3,0 +2,5 2 200 1 200 0 199 +4,3 9 18,7 bn € = 55% increase Energy taxes 199 8 3,0 200 5 6,5 5,0 1,8 16,0 ETR ~ 34 + 3,0 Road toll for trucks 22,8 Energy taxes 2003/2005 Road Toll cents/km) Electricity cents/kWh) Natural gas cents/kWh) Fuel oil Diesel cents/l) Petrol cents/l) (0 → 9-14 (0 → 2,1 (0,2 → 0,6 (4,1 → 6,2 cents/l) (31,7 → 47,2 (50,1 → 65,6 Total green taxes almost 90 Bn (incl. tobacco, land etc.) GERMAN ETR: RECYCLING OF THE RETURNS Almost 90 Percent was recycled to citizens in order to reduce labour cost Environment Projects • Renewable Energies • Less CO2 in buildings • Tax break bio-fuels Budget use 9% 2% Govt. Social Security Economy Pension system Decrease in pension costs = 16 Bn relief for employers, employees and pensioners 89% Our Comment: • Great idea, in principle • Less than perfect execution POSITIVE EFFECTS ON NATURE, INNOVATION AND LABOUR First Results of Ecological Tax Reform Fuel consumption (-16%) CO2-emissions (2-2,5%) Pension costs (-16 bn) Costs for industry (-1 bn) Empty truck travel Imported fossil fuels (13%) Overall tax burden (-4 %) Less More Tax share of Nature Car sharing (+70 %) Public transport (+5 %) Energy saving technologies Energy efficiency Gas-powered cars (x10) Bio-fuelled cars (x2) Job creation (≈ 250.000) Renewable energies JOBS IN THE ENERGY SECTOR IN GERMANY 2005 More jobs in RENs than in our heavily subsidized problem energies 6000 10000 20000 50.000 REN: 150.000 Water Geothermal power Solar jobs Bioenergy Problem energies: 107.000 jobs 64.000 Windpower 44000 Renewable Energy coal 38000 nuclear power 25000 lignite Source: BEE 2005 100% Green shift-OPTION 3 2004-100% GREEN Carbon $300/ton Land 9.6% Waste $2/bag 1c/gal >100gals Chem $300 on product pesticides fee TOTAL ENERGY 36.0% Water $2.6B revenue land 54.5% TOTAL AIR AND WATER 3.5% TOTAL WASTE TOTAL CHEMICALS 5.9% 0.1% Why should we? .25% Financial speculation tax (A NO BRAINER) Credit default swaps Mortgage backed securities currency 95% Speculation hedges options derivatives Land bubble $269 Million Exemptions IPOs, new stock Venture Capital Angel Investors Small business loans Etc.
