On April 27, the Vermont House of Representatives heard testimony on a short form bill, introduced by Winooski Rep. Diana Gonzalez, that seeks to establish a “carbon pollution fee” in Vermont. The funds raised from the tax would be returned to Vermonters as quarterly dividends.
The establishment of a carbon tax is an idea that is being discussed at both the federal level and in states that recognize a common-sense approach to reining-in carbon emissions. Why is a carbon tax such a smart idea? As an editorial in The Washington Post in February pointed out, “Put a price on the pollution, and businesses and consumers will change their behavior in thousands of ways that government regulators would not have predicted and could not have compelled.” And since Vermont does not produce any fossil fuels, a tax here is a no-brainer.
But there are a lot of different ways to set up a carbon tax program. If Vermont wants to be able to call the shots in our own state so that our program serves us well, we need to have fruitful discussions about the strategy now. Across New England our neighbors are considering their own versions of carbon taxes, and we don’t want to be caught having to tag-on to schemes other states have tweaked for themselves. In Massachusetts a senate bill proposes additional rebates to energy-intensive businesses and businesses that “face stiff out-of-state competition.” A house bill there establishes a green infrastructure fund that will make grants to municipalities or groups of municipalities working together. The house bill also returns guaranteed percentages of the funds only to the households in the bottom three income quintiles. Rhode Island has a provision in its proposed bill that the bill will take effect only when Massachusetts passes its own carbon tax bill. Connecticut has a proposed bill that returns an equal dividend to every state resident, including children.
A carbon tax scheme in Vermont could levy the tax when fuels are brought into the state, or the tax could be applied at the point of sale, as Gonzalez proposes. It could allocate some funds to bolster our already sparkling green jobs sector. We could return all the funds to businesses and individuals, making sure to account for the burden of the tax on our lowest-income earners.
According to the Congressional Budget Office, if 12 percent of carbon tax revenues are returned to the 20 percent of households with the lowest income, those households will be made “whole” and suffer no harm from increasing energy prices (see this report for more on the economic modeling of a Vermont carbon tax). We could be creative with slashing other taxes in the state, like current taxes on things we want more of: income and sales.
Though there is some movement among national conservatives to pursue a carbon tax in lieu of federal carbon pollution regulations, we can’t afford to wait while Washington dithers. A carbon tax is the smart thing to do, and our neighbors know it. By implementing a carbon tax that works for Vermonters we have an opportunity to be one of the voices setting the tone of the discussion at the federal level and with other states. We can decide how to do it. But to do it our way, we need to act now.