Offsets for a Green Tax Shift
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?
Individual Income Tax?
• Over $400 M, 40% Tax Dep’t receipts over
last several years
• Can eliminate tax on large percentage of
filers for relatively small expenditure
Individual Income – Examples
To eliminate income tax on x %, who earn…would cost…
• 52% of filers <$30K Income $19.6 M
• 71% of filers <$50K Income $72.2 M
• 100% of filers all income brackets
– $380M - $420M, depending on year
Drawbacks of Income tax Offset
• State Income tax is progressive enough that
lowest income filers have little or no
liability.
• Offsetting Income tax would not help
compensate for higher fuel costs.
Corporate/Business Income Tax?
• Could potentially be eliminated
• Left alone for now
– Businesses derive benefits from offsetting
FICA
– Law of unintended consequences
– Current work being done to change corporate
taxation, requiring Unitary Combined reporting
to crack down on income-shifting
Sales and Use Tax?
• Considered ‘green’, as it taxes throughput
and waste.
• Left alone for now.
• Must be reviewed and revised to tax
environmentally damaging products more
heavily than benign ones.
• Review exemptions, leave only those on
necessities used by all people.
Federal Payroll Taxes
FICA – Federal Insurance Contributions Act
• Part 1 – Social Security/OASDI
– (Old Age, Survivors, Disability Insurance)
– 12.4% of all wages paid up to $87,900. Ceiling
increases to $90,000 in 2005.
– Half paid by employer, half by employee,
unless self –employed.
FICA Taxes, cont’d
• Part 2 – Medicare
– 2.9% on all wages – no ceiling
– Half paid by employer, half by employee, unless self
employed.
•
Total of 15.3% of wages paid to FICA
- 7.65% each by employer and employee
- (over 90% of Vermonters are unaffected by ceiling)
Why FICA?
• Better direct offset than income taxes.
• Easy to measure due to federal reporting
requirements.
• Can reimburse based on wages and taxes
paid, starting at the bottom of the income
scale.
• Better for business: 7.5% tax reduction
Examples
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
Economic Benefits-FICA offset
• Returns income to those most likely to
spend it, boosting local economy.
• Incentive for employment.
• Aids businesses as well as workers.
• If its favorable to employ or be employed
here, that’s a Business-Friendly
environment for Vermont!
Shifts tax from a ‘good’ to a ‘bad’!
• Revenue collected based on carbon
emissions and/or water usage, which
individuals and businesses can work to
control. There is a financial incentive to
make responsible decisions.
• Damaging impacts of payroll taxes are
offset, boosting Vermont economy.
Design/Administration
Captive Insurance
Insurance
Bank Franchise
Telephone Company
Telephone Property
Telecommunications
Cigarette
Tobacco ProductsTOTAL ENERGY
Beverage
Other general taxes
Other fees
TOTAL WASTE
TOTAL AIR AND WATER
Speculative Gains Tax
current use property
Corporate Income
land-NICU
Meals & Rooms
Sales & Use
Estate Tax
buildings-NICU
Personal Income
Property Transfer Tax
$2.6B revenue
2004 VT Taxes+FPT
Fed Payroll tax
Design/Administration
Captive Insurance
Insurance
Bank Franchise
Telephone Company
Beverage
Cigarette
Tobacco Products
Other general taxes
Other fees
Telephone Property
TOTAL ENERGY
2004 VT Taxes+FPT
TOTAL WASTE
TOTAL AIR AND WATER
Speculative Gains Tax
Telecommunications
current use property
Corporate Income
land-NICU
Meals & Rooms
Sales & Use
Estate Tax
buildings-NICU
Personal Income
Property Transfer Tax
Fed Payroll tax
$2.6B revenue
Design/Administration
Captive Insurance
Insurance
Beverage
Cigarette
Tobacco Products
Bank Franchise
Telephone Company
Other general taxes
VT Taxes+FPT
2004 REVISED
TOTAL ENERGY
Other fees
Telephone Property
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
$2.6B revenue
100% Green TAX shift-2004
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%
Conclusions
• Can shift to tax resources and waste without
hurting and perhaps helping the economy.
• Can eventually simplify taxation and
revenue generation enormously by shifting
to a few broad based green taxes.
• Like anything else, all that’s missing is the
political will.