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BLUE RIBBON TAX COMMISSION Dec. 8, 2009 Revenue for a Sustainable Economy:

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.

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BLUE RIBBON TAX COMMISSION Dec. 8, 2009 Revenue for a Sustainable Economy:

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  1. 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

  2. Acknowledgements Student Researchers Common Assets Ross Saxton Mark Kolonowski Beth Nolan Colin McClung Conor Casey Ian Raphael Will Murray Elliot Wilkinson-Ray Susan Skalka 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 Invitation: Rep. Dave Sharpe & Commission

  3. 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

  4. TAXES=THIRD RAIL OF POLITICS

  5. WHOSE OX WILL YOU GORE? OR WILL IT GORE YOU?

  6. GREEN ECONOMY? PRICES VT GREEN ECONOMY Always cheaper to do the wrong thing.

  7. 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”

  8. ECONOMY = THROUGHPUT (Value added) (By K & L) ECONOMY POLLUTION DEPLETION LAND USE Purpose: Max GDP = max throughput = DUMB GROWTH!

  9. ECONOMY = THROUGHPUT (Value added) (By K & L) ECONOMY POLLUTION DEPLETION LAND USE Purpose: max value added/ minimum throughput=SMART GROWTH!

  10. 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

  11. Survey-EU Green taxes

  12. 1999 VERMONT TAXES

  13. 2000 VERMONT TAXES

  14. 2001 VERMONT TAXES

  15. 2002 VERMONT TAXES

  16. 2003 VERMONT TAXES

  17. 2004 VERMONT TAXES

  18. 2008 VERMONT TAXES

  19. 2004 VERMONT TAXES

  20. 2004 VERMONT TAXES: LAND&BLDGS

  21. 2004 VERMONT GREEN TAXES

  22. GREEN TAX CRITERIA ECONOMIC EFFICIENCY DISTRIBUTIVE EQUITY ENVIRONMENTAL PROTECTION EASE OF ADMINISTRATION Tax Commission Mandate Sustainability Appropriateness Equity Minimize regressivity-minimize tax on LI Fair, efficient, effective administration

  23. GREEN TAX NEW REVENUE

  24. 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?

  25. GREEN TAX SHIFT OPTION 1 • Offset Individual income tax -$429.5M • Offset Corporate/business income tax -$55.5M • Offset Telecommunications tax -$15M

  26. PAYROLL vs INCOME TAX PAYROLL TAX MUCH MORE REGRESSIVE!

  27. GREEN TAX SHIFT OPTION 2 -$500M Payroll tax <$35K income and pro-rate above Or cash refund

  28. +4,3 2003 2002 +2,5 2001 +3,0 2000 +2,5 +4,3 1999 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 3,0 + 3,0 Road Toll (0 → 9-14 cents/km) 18,7 bn € = 55% in- crease 6,5 Electricity (0 → 2,1 cents/kWh) 2005 5,0 Natural gas (0,2 → 0,6 cents/kWh) 1,8 Fuel oil (4,1 → 6,2 cents/l) 16,0 Diesel (31,7 → 47,2 cents/l) Road toll for trucks ETR Petrol (50,1 → 65,6 cents/l) ~34 22,8 Total green taxes almost 90 Bn (incl. tobacco, land etc.) Energy taxes Energy taxes 2003/2005 1998

  29. 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 Govt. Social Security Economy Pension system Decrease in pension costs = 16 Bn relief for employers, employees and pensioners • Our Comment: • Great idea, in principle • Less than perfect execution

  30. POSITIVE EFFECTS ON NATURE, INNOVATION AND LABOUR First Results of Ecological Tax Reform 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 • 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

  31. JOBS IN THE ENERGY SECTOR IN GERMANY 2005 More jobs in RENs than in our heavily subsidized problem energies REN: 150.000 jobs Water Geothermal power Solar Bioenergy Windpower Problem energies: 107.000 jobs Source: BEE 2005

  32. 100% Green shift-OPTION 3 $2.6B revenue

  33. Why should we?

  34. .25% Financial speculation tax (A NO BRAINER) Credit default swaps Mortgage backed securities currency hedges options derivatives 95% Speculation Exemptions IPOs, new stock Venture Capital Angel Investors Small business loans Etc. Land bubble $269 Million

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