BLUE RIBBON TAX COMMISSION
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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

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


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

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


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

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


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

TAXES=THIRD RAIL OF POLITICS


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

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


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

GREEN ECONOMY?

PRICES

VT GREEN ECONOMY

Always cheaper to do the wrong thing.


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

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”


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

ECONOMY = THROUGHPUT

(Value added)

(By K & L)

ECONOMY

POLLUTION

DEPLETION

LAND USE

Purpose: Max GDP = max throughput = DUMB GROWTH!


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

ECONOMY = THROUGHPUT

(Value added)

(By K & L)

ECONOMY

POLLUTION

DEPLETION

LAND USE

Purpose: max value added/ minimum throughput=SMART GROWTH!


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

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


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

Survey-EU Green taxes


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

1999 VERMONT TAXES


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

2000 VERMONT TAXES


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

2001 VERMONT TAXES


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

2002 VERMONT TAXES


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

2003 VERMONT TAXES


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

2004 VERMONT TAXES


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

2008 VERMONT TAXES


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

2004 VERMONT TAXES


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

2004 VERMONT TAXES: LAND&BLDGS


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

2004 VERMONT GREEN TAXES


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

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


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

GREEN TAX NEW REVENUE


Additional revenue from green taxes where should it go

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?


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

GREEN TAX SHIFT OPTION 1

  • Offset Individual income tax -$429.5M

  • Offset Corporate/business income tax -$55.5M

  • Offset Telecommunications tax -$15M


Payroll vs income tax

PAYROLL vs INCOME TAX

PAYROLL TAX MUCH MORE REGRESSIVE!


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

GREEN TAX SHIFT OPTION 2

-$500M Payroll tax <$35K income and pro-rate above

Or cash refund


Energy taxes in germany increased by 55 percent additional increase in 2005 through truck toll

+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


Almost 90 percent was recycled to citizens in order to reduce labour cost

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


Blue ribbon tax commission dec 8 2009 revenue for a sustainable economy

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


More jobs in rens than in our heavily subsidized problem energies

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


100 green shift option 3

100% Green shift-OPTION 3

$2.6B revenue


Why should we

Why should we?


25 financial speculation tax

.25% Financial speculation tax

(A NO BRAINER)

Credit default swaps

Mortgage backed securitiescurrency

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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