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Concentration of CO2 in the Atmosphere

Tax Reform and Climate Action:

Starting the Conversation

By Dana Drugmand

On yet another record-breaking warm day in April, a group of Vermonters gathered on the lawn in front of Capstone Community Action in Barre, many holding signs that read “Tax Reform and Climate Action.” Representative Johannah Leddy Donovan of Burlington stepped up to the podium and began a statewide conversation on “Tax Reform and Climate Action.”

Rep. Johannah Leddy Donovan, from the Capstone Community Action, speaking at the Tax Reform and Climate Action proposal event. Courtesy photo.

Rep. Johannah Leddy Donovan, from the Capstone Community Action, speaking at the Tax Reform and Climate Action proposal event. Courtesy photo.

Rep. Donovan announced a proposal that would reduce the state income tax burden on all Vermonters, provide extra financial benefits for low-income earners and do something meaningful to address climate change.

Despite the tweets of our climate change denier-in-chief, Donald Trump, climate change is real…Putting a price on carbon pollution will speed our transition to the clean energy future,” she remarked. “This proposal will reduce taxes…and replace them with a gradually rising fee on the pollution that is causing climate change and threatening the Vermont way of life.”

Rep. Donovan’s proposal is one of four “short form” bills recently introduced into the legislature that call for a fee on fossil fuels. Representatives Sarah Copeland-Hanzas (Bradford), Diana Gonzales (Winooski) and Martin LaLonde (South Burlington) are sponsoring the other three bills regarding sales tax elimination, carbon dividends, and property tax relief, respectively. The four proposals were unveiled simultaneously on April 10, 2017 at four different press conferences across the state. Their primary purpose is to ignite serious discussion about the need for broad, more equitable tax reform that also addresses the pressing crisis of climate change.

Our bills are conversation starters,” said Rep. Donovan, a member of the tax-writing Ways and Means Committee and Chair of the Working Vermonters Legislative Caucus. “Because President Trump’s budget will wreak havoc on Vermont, we need to have a conversation about aligning our tax code with Vermonters’ needs and priorities.”

Rep. Donovan’s bill (H.528) proposes reducing the personal income tax rate for the lowest income tax bracket (from 3.55 percent to 1.75 percent) – a benefit all working Vermonters would realize. Her proposal would also double the state’s Earned Income Tax Credit – one of Vermont’s most powerful anti-poverty initiatives for working families, assisting over 40,000 low-income households each year. Vermont businesses earning less than $400,000 annually would also be exempt from the corporate income tax under Rep. Donovan’s proposal. Each of these money-saving, income tax relieving benefits would be offset with a fee charged to fossil fuel distributors, making the policy revenue-neutral.

The sales tax elimination bill (H.533) sponsored by Rep. Copeland-Hanzas proposes cutting the statewide sales and use tax (currently at 6%) by one percent each year over six years. Revenue replacement would come from a gradually rising fossil fuel fee.

Rep. LaLonde is proposing a reduction in statewide education property tax rates paired with revenue replacement from a carbon pollution fee (H.532).

These three bills are focused squarely on tax reform. The proposals aim to replace taxes on things Vermont wants to foster, like income, sales and property, with a fee on something the state wants to reduce – the carbon pollution contributing to climate change.

Rep. Sarah Copeland Hanzas announces the new tax reform proposal with a fee on carbon pollution to a group in Bradford, Vermont. Courtesy photo.

Rep. Sarah Copeland Hanzas announces the new tax reform proposal with a fee on carbon pollution to a group in Bradford, Vermont. Courtesy photo.

Rep. Gonzalez’ bill is a bit different. Her proposal is modeled after the recent call by prominent Republican leaders who are pushing for a carbon fee and dividend to reduce carbon emissions. Rep. Gonzales’ bill, H.531, would set a fee on carbon pollution starting at $10 per ton and rise each year until it equals the “Social Cost of Carbon” as calculated by the Environmental Protection Agency (EPA). The collected revenue would be returned to every Vermonter and Vermont business in equal dividend amounts on a quarterly basis, either in the form of checks or direct deposits.

Climate action is good for Vermont’s economy,” said Rep. Sarah Copeland-Hanzas, lead sponsor of a bill to eliminate the sales tax. “President Trump wants more coal, but we don’t have any coal jobs in Vermont. What we do have is over 17,000 Vermonters working in clean energy. And cleaner, high-tech heating and transportation can mean more money in Vermonters’ pockets.

Clean energy is now the fastest growing sector of Vermont’s economy. Policies like carbon pricing could further accelerate job growth in this sector and more broadly stimulate the state’s economy by keeping more of the $2 billion Vermonters spend every year on imported fossil fuels in the state. That means more money in people’s pockets and more motivation to reduce reliance on fossil fuels. It also means putting Vermonters to work weatherizing homes, installing solar, transitioning them to heat pumps or pellet stoves for home heating needs and more.

Beyond the clean energy industry, a growing number of Vermont business leaders are voicing support for a carbon fee coupled with progressive tax reform.

My business — The Alchemist — nearly got wiped off the map by Irene six years ago,” said Jen Kimmich, owner of the Alchemist brewery. “Global warming and its dangerous consequences are real. We have a responsibility to do all we can to tackle it.”

Iconic ice cream brand Ben & Jerry’s hosted the press conference announcing Rep. LaLonde’s property tax relief proposal. “The evidence for climate change cannot be any more clear. 2016 was the warmest year on record and it was the third consecutive year in which a record was set worldwide for average surface temperatures,” Ben & Jerry’s co-founder Jerry Greenfield remarked at the event. “We all have a duty and responsibility to not only make a stronger economy, to not only have a more sustainable world, but by doing it by having a tax system that is more fair and more just.”

In addition to encouraging long-term sustainability and economic growth, the new tax reform and climate action proposals are aimed at protecting and assisting low-income Vermonters.

The energy burden placed on low-income Vermonters from a carbon-based economy has a significant impact on their financial stability,” explained Dan Hoxworth of Capstone Community Action. “To reduce the risk to, and the impact on, low-income Vermonters, we need to accelerate the transformation of our economy towards renewable [energy] and away from carbon-based fuels.” He emphasized that carbon pollution fee proposals like the one sponsored by Rep. Donovan align with the goal of working towards a healthier, more equitable and affordable state.

These proposals also speak to the obligation to leave a sustainable legacy for current children and future generations. Scientists have warned that doing nothing to reduce carbon pollution will result in widespread climatic calamity, likely within the lifetime of today’s youth. This message of the risk climate change poses to younger generations was brought directly to the State House by nearly 1,500 Vermont students who rallied for climate action on April 12th, just two days after the roll out of the four carbon pricing proposals. These students voiced strong support for the new bills, adding a sense of urgency to the legislative effort to address carbon pollution.

The four bills are now in House committees. With the current legislative session set to wrap up soon, it is not expected that the bills will move forward at this time. Instead, the lead sponsors are hoping to generate robust conversation around the need for broad tax reform coupled with climate action, leading to more detailed legislation and deeper consideration in next year’s session.

Other states in the region are also looking into a carbon tax. Massachusetts is leading the charge with two bills that have garnered 79 total co-sponsors. New York, Connecticut, and Rhode Island each have pending carbon tax bills as well. New Hampshire also has a bill calling for a carbon tax study.

Taken together, these initiatives underscore the importance of states stepping up to lead in the face of federal government hostility towards climate action.

“Donald Trump’s policies will only accelerate climate change and endanger the jobs and health of thousands of Vermonters. That’s why it’s so important that we fight back against the economic and environmental damage his policies will cause,” write Reps. Copeland-Hanzas, LaLonde, Gonzales, and Donovan in a joint op-ed piece. “Tax reform and climate action may be Vermont’s most effective response.”

Dana Drugmand is a student at the Vermont Law School in their Master’s in Environmental Law & Policy, as well as an intern at the Vermont Natural Resources Council (VNRC). VNRC is an active partner in the Energy Independent Vermont coalition. Learn more at www.energyindependentvt.org or contact Dana at ddrugmand@vnrc.org.

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