VT Green Tax Shift & Common Asset Fund
Dec. 7, 2004
UVM Green Tax course
Public Administration 395:
Melissa Bailey
Thomas A. Benoit Sr.
Amanda Dow Davis
John Demeter
Cheryl L. Diersch
Gary Flomenhoft, Instructor
Peter M. Freeman
Andrew Jope
John Mejia
Rachel Marie Weston
http://www.uvm.edu/~gflomenh/GRN-TAX-VT-PA395/
“There is nothing more difficult to carry
out, more doubtful of success, nor more
dangerous to handle, than to initiate a
new order of things. For those who would
institute change have enemies in all those
who profit by the old order, and they have
only lukewarm defenders in all those who
would profit by the new order.”
---Nicolo Machiavelli, 1490
WHAT ARE GREEN TAXES?
"PAY FOR WHAT YOU TAKE, NOT FOR
WHAT YOU MAKE"
"TAX WASTE, NOT WORK”
Tax Nature, NOT Labor or Capital
•Environmental protection
•Economic Efficiency
•Using market incentives
Survey-EU Green taxes
EU Types of Green taxes
NW GREEN TAX SHIFT
Inventory of NE GREEN TAXES
Source:
Janet Milne,
Env. Tax Policy
Inst., Vt. Law
School
NE GREEN TAXES
Source:
Janet Milne,
Env. Tax Policy
Inst., Vt. Law
School
NE GREEN TAXES
CURRENT 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 PRINCIPLES
What is the goal of government?
What is the goal of taxation?
Can they be combined?
Excludable
Non-Excludable
Market Good:
Food, clothes, cars,
land, timber, fish once
captured, farmed fish,
regulated pollution
Open Access Regime:
(misnamed: Tragedy of the
commons)
Oceanic fisheries, timber
etc. from unprotected
forests, air pollution, waste
absorption capacity
Potential market good
Non-rival} (Tragedy of the “noncommons”)but inefficient:
patented information,
Pond, roads (congestible),
streetlights
Private beaches, private
Non-rival,
gardens, toll roads,
congestible zoos, movies
Pure Public Good:
climate stability, ozone
layer, clean air/water/land,
Biodiversity, information,
habitat, life support
functions, etc.
Rival}
Public beaches, gardens,
roads, etc.
Taxation + Provision of Public
Goods
Taxation Public Goods
Green Taxes
GREEN TAX PRINCIPLES
1.Internalize external costs
2.Behavioral Approach
3.Revenue Generating
EXTERNAL COSTS?
ECONOMY
POLLUTION
DEPLETION
LAND USE
(Not to mention social costs)
PRICES LIE
Vermont GPI study
20,000
18,000
Burlington
Chittenden
16,000
Vermont
US
$/capita
14,000
12,000
10,000
8,000
6,000
4,000
2,000
1950
1960
1970
1980
Year
1990
2000
GDP AND HAPPINESS
1. Cost Internalization
•Pigouvian theory (AC Pigou)
•external costs
•Polluter pays principle
•restoration costs
•Least cost abatement-
•cost required to abate pollution
2. Behavioral Approach
WHATEVER YOU TAX YOU GET LESS
OF
(WITH ONE EXCEPTION)
WHAT DO WE WANT LESS OF?
WHAT DO WE WANT MORE OF?
TAX ON BUILDINGS - production cost
P
S1
CS
p1
PS
D
q1
Q
TAX ON BUILDINGS - production cost
S2
P
tax S
1
CS
p2
p1
Deadweight
loss
PS
tax
D
q2
q1
Q
Inelastic demand-gasoline (few subs.)
P
S1
CS
p1
PS
D
q1
Q
Inelastic demand-gasoline
S2
P
S1
CS
p2
PS
p1
tax
tax
D
q2
q1
Q
Elastic demand-movie (many subs.)
P
S1
CS
p1
PS
D
q1
Q
Elastic demand-movie
S2
P
p2
p1
S1
CS
PS
D
tax
q2
q1
Q
TAX ON LAND - no production cost
P
S
“Buy land, they ain’t
making any more.”
-Will Rogers
P1
D
Q1
Q
TAX ON LAND - no production cost
P
S
“Buy land, they ain’t
making any more.”
-Will Rogers
P*
P1
tax?
D
Q1
Q
TAX ON LAND - no production cost
S
P
“Buy land, they ain’t
making any more.”
-Will Rogers
P*
tax?
P1
tax
Ps
D
Q*
Q1
Q
Modern Economists
Right: “Land tax is the least bad tax”
---Milton Friedman
Green: “Taxation of value added by labor and
capital is certainly legitimate. But it is both more
legitimate and less necessary after we have, as much
as possible, captured natural resource rents for public
revenue.”
---Herman Daly
Left: “Usurious rent is the cause of worldwide
poverty”
---Joseph Stiglitz
3. Revenue Generating
Green tax increase How to spend the money?
Deficit reduction: none in VT
Dedicated revenues: ~$5 Million
Other tax relief: ~$500 Million
GREEN TAX CRITERIA
1. ECONOMIC EFFICIENCY
2. DISTRIBUTIVE EQUITY
3. ENVIRONMENTAL PROTECTION
4. EASE OF ADMINISTRATION