Project Report:
Green Tax and Common Assets Project-2010
Purpose
- Investigates the causes of economic imbalances.
- Investigates the effect of the global financial system and/or the monetary system in fostering a sustainable economy.
- Investigates causes tending to destroy or impair the free-market system.
- Explores and develops market-based solutions.

Summary

The Vermont Green Tax and Common Assets Project researches, educates and disseminates information on recovery of unearned income from common assets such as the monetary system, speculation, land, minerals, spectrum and other resources. In addition we investigate green taxes on throughput including depletion, land use, and pollution, which are ignored by market economics.
These sources of income are a better alternative to taxing productive activities such as income, wages, excise, sales and building construction that create disincentives to productivity. By taking the profit out of speculation in finance, land, and natural resources, investment is directed towards real production and real goods. Additionally, we investigate the feasibility of redirecting some income from common assets to citizens in the form of a dividend, similar to the Alaska Permanent Fund annual dividend which contributes to Alaska’s standing as the state with the lowest level of wealth inequality in the U.S.

Description

2009-2010
In 2009-2010 we prepared and published an updated Green Tax plan for the state of Vermont. Director Gary Flomenhoft testified 3 times to the legislature about Green tax and common asset reforms, and also met with the Main St. downtowns organization on property tax reforms, specifically to implement incentive taxation in Downtown zones by creating a split rate tax, increasing taxes on land, and decreasing taxes on buildings. Testimony included the Vt Senate Finance Committee, the VT House Ways and Means Committee, and the "Blue Ribbon Tax Commission". Testimony and press coverage from the Tax Commission can be found online at:
http://www.leg.state.vt.us/jfo/Tax%20Commission.htm

Several of the recommended reforms were passed by the legislature and one was vetoed by the governor. The following were signed into law:
Higher discharge fees on Vermont Yankee nuclear power plant for cooling water discharge into the CT River. This is consistent with the greentax philosophy of taxing pollution, and making the polluter pay for damages as the thermal pollution of the Connecticut River has unknown effects on life in the river.
Reduction of capital gains taxes for business, but NOT for speculation in stocks and bonds or real estate. The justification for this is that speculation does not add anything productive to the economy and should not be rewarding with tax breaks. However, business creation develops jobs and new products which should be encouraged.

A bi-partisan bill was passed to increase the penalty for conversion of current use property for development, but it was vetoed by the governor. Current use taxation is a program in several North Eastern States to maintain the rural character of the states by encouraging forests and agriculture in productive use. Plots over 25 acres which are kept in agriculture production or timber harvesting are taxed at the value in their current use, not on the maximum market value they would have if converted to real estate development. This is a huge tax break for many landowners. If the land is later converted to development use, there is a penalty to recover some of the revenue lost during current use. This penalty is woefully small, generating revenue in the hundreds of thousands, while loss of revenue from current use is in the millions. Needless to say, some developers game the system by holding land in current use as a "hobby, horse, or "gentleman" farm, and then later sell it for development when land values have spiked. The penalty does not discourage this kind of behavior, so the legislature wisely voted to increase the penalty.

Higher fees were proposed for use of groundwater for bottled water, but it was voted down in committee. The Ways and Means Committee considered a "fee bill" and there were several proposals for groundwater extraction fees. Committee member Dave Sharpe proposed a 1c per bottle tax on bottled water. State Senator Hinda Miller proposed a 12c per bottle tax on bottled water, and Gary Flomenhoft proposed a 12% tax on water extracted for bottling. All were rejected.

Discussion with the "downtown" organizations from around the state resulted in several interested in implementing a tax-shift by taxing buildings less and land more. We plan to work with them this year to pass enabling legislation at the state level to allow this. In late Sept. 2010 we confirmed that we will be working with St. Albans and Rutland planning departments to research the impacts of a land value tax shift in growth centers there. Three student researchers from the Economics for Sustainabiity class will be doing the research, and the St. Albans representative is expected to introduce legislation for a package of new tools for growth centers including land value taxation.

Other legislation was proposed from our 2010 testimony, and it will added to this report as soon as it can be compiled from dispersed sources.

This fall we are doing a research project on detrimental subsides in Vermont and will publish a new report in late fall or early spring. We are working with the "Green Scissors" project to identify wasteful subsidies in Vermont that are environmentally or socially detrimental, and make recommendations for elimination. Green Scissors can be found at:
http://www.greenscissors.com/

Faculty member Josh Farley returned from Sabbatical and is teaching a course entitled economics of sustainabiilty. Half the class is working on the Vermont Common Assets Trust Project (VCAT) with us. The influx of students adds new energy to the project. Several masters theses were completed on this topic last year including ALLOCATING VERMONT’S TRUST; DIVIDENDS OR
PUBLIC INVESTMENT FROM CARBON CAP AND AUCTION REVENUES? by Dan Kirk, and
CARBON MARKETS AND THE VERMONT COMMON ASSET TRUST: OFFSET CREDITS AND OUR SHARED FUTURE by Dave Propen. A senior research paper was also written by Jonathon Maddison entitled An Analysis of Carbon Revenue and Distribution in the Vermont Common Assets Trust.

2010-2011
Subsidy Reform
This fall we completed our research course on Subsidy Reform in Vermont. The report is being written currently and will be published before the end of the legislative session. In this research we analyzed government spending and tax breaks for "perverse" subsidies, which are detrimental environmentally, socially, or economically. In the realm of tax breaks, known as "tax expenditures" many of them have outlived their usefulness, but there was no sunset provision. The Blue Ribbon Tax Commission and House Ways and Means committee adopted the reform of sunsetting all tax expenditures such as sales tax exemptions, except on food or medicine. One blatant example of a huge tax break is the existing sales tax exemption for residential fuels. This exemption was probably created in the 1970's during the oil crisis, and amounts to $43 million in lost revenue for the state. It provides an advantage to fossil fuels at a time when we are trying to reduce imported oil, reduce carbon emissions, and switch to more renewable fuels. This subsidy is socially, environmentally, and economically detrimental and we fully support the state eliminating it. We found numerous other detrimental subsidies which will be listed in our report. The national Green Scissors project has agreed to work on publication with us. Report on Subsidy Reform was completed and sent to the printer on June 3, 2011. Green Scissors is evaluating report for inclusion.

Other Course Work, fall 2010
Farley's Economics of Sustainability course contributed work to projects on air, water, and land value taxation. A 31 page report was completed on the use of groundwater for a common assets trust fund paying for infrastructure repairs and other expenses in the state. A 23 page paper was written on the Institutional design of a common assets trust fund. Three students worked on the land value tax shift project with the Main St USA Downtown organization in Vermont. We completed analytical studies for three downtown communities St. Albans, Newport, and Rutland, Vermont. Students with faculty guidance evaluated the impact of a 100% land value tax shift in the downtown districts of these towns. All three towns are suffering from a depressed economy, and a lack of business and vibrancy in the downtown. Removing taxes from buildings and shifting to taxing locations only has provided a no-cost method for civic revitalization everywhere it has been done, especially in Pennsylvania where the reform if most common.

House Ways and Means/Blue Ribbon Tax Commission-Feb, 2011
Upon submission of the final report by the Blue Ribbon Tax Commission to the Vermont House Ways and Means Committee, the Committee asked for testimony by three economists in the state. One was a liberal from the Public Assets Institute, one was conservative, and the third was Gary Flomenhoft Director of the Green Tax and Common Assets Project, presumably chosen for being "green" rather than an ideology of the left or right. We submitted seven pages of testimony on the Commission Report and agreed with some recommendations and disagreed with others. We supported their recommendation to sunset all tax expenditures, but disagreed with their recommendation to apply the sales tax to services in addition to goods. Our justification is that taxing services reduces jobs at a time when unemployment is high. We recommended green taxes by taxing energy and resource inputs, and solid waste outputs from goods and services rather than taxing goods or services directly.

Commission member Schubart adopted our recommendation for an extraction tax on all non-renewable natural resources including stone, aquifer, oil, gas, coal, gravel, topsoil, and sand. Wood would be subject to the depletion tax if a reforestation plan was not filed.

In our testimony to Ways and Means we introduced the concept of financial transaction taxes which are present in at least 30 countries. These small transaction costs reduce financial speculation, and provide funds to run stock exchanges and some general funds.

Legislation
One of the primary ways to evaluate our success is the number of bills introduced by the legislature related to our work. In 2011 State Senator Anthony Pollina requested our materials on green taxes and common asset valuation. We have continued to work with Senator Hinda Miller, who is willing to submit additional bills on groundwater and mineral fees. She also arranged a meeting for us with the State Treasurer to discuss state monetary policies, including a state bank. During the 2011 legislative session, numerous bills have been submitted consistent with principles we have advocated:
H.19 banning plastic grocery bags.
H.20 expanding the public trust doctrine for rivers and streams
H.56 renewable Energy Funding
H.74/S.21 expanding the bottle bill
H.98 taxation of candy
H.109 raises the tobacco and cigarette tax
H.145 fees on disposable carry-out bags. We submitted testimony.
H.151 tax on sugar-sweetened beverages
H.218 expand producers responsibility for solid waste
H.243 Tax Commission reforms. We provided extensive testimony on this bill.
H.407 Groundwater fee bill. We promoted this in 2010, and committee reintroduced it.

I want to make special mention of House bill H.385 the Vermont Common Asset Trust Fund. This bill introduced on March 8, 2011 is identical to Senate bill S.44 we initiated and helped write in 2007 . The Vermont Common Assets Trust Fund Concept was originated by Gary Flomenhoft in 2005 in the course on Green Taxes. It was derived from Peter Barnes' book Capitalism 3.0, and is an effort to retain the best features of the free market system, while correcting its failures, mainly the privatization of rent on the commonwealth. Rachel Weston, a student in the class is now a member of the House Committee on Natural Resources which introduced the bill.

Ways and Means Committee member Dave Sharpe, this year is proposing a bill to collect 28c per gallon of groundwater extracted in Vermont for resale by water bottlers. This is a direct result of our work in the past. Cartoonist Tim Newcomb did a noteworthy cartoon on the topic, which is attached. Currently bottled water is sold for twice the price of highly taxed gasoline, has an exemption from sales taxes, and has no extraction charge. At a level of 99 million gallons per year, this would amount to revenue of $27.7 million dollars. The profit margin on bottled water is estimated at about 88%. Collection of unearned economic rent on natural resources can reduce the need for taxes on value added productive activities like income, wages, business profits, sales, enhancing free enterprise.

Senate Natural Resources Committee
Testimony by Gary Flomenhoft was requested and provided for a bill establishing a fee on plastic grocery bags. We took the opportunity to promote a broader tax on all solid waste.

Spring 2011 Course work
This semester Farley and Flomenhoft are offering an ecological-economics "atelier' (service-learning workshop) course on the Vermont Common Assets Trust Fund. Graduate students have chosen to work on groundwater, land value taxation, revision of the forest section of our Common Assets Report, calculation of economic rent on Vermont resources, and Institutional Design of a Common Assets Trust Fund.

This Trust Fund is based on the model of the Alaska Permanent Fund, and the Permanent Fund Dividend which pays all Alaskans a share of the oil wealth in Alaska. Karl Widerquist of Georgetown U. and Michael Howard of U. Maine are editing a book called "Exporting the Alaska Model." Gary Flomenhoft was asked to submit a chapter on Vermont entitled, "Creating Sovereign Wealth (and a dividend) in a State with no Wealth, The Case of Vermont." The book will be published in early 2012. The chapter was submitted in late 2010 and was also submitted to the Journal of Basic Income.

Flomenhoft has helped to coordinate a statewide group on public banking and recently met with the State Treasurer to promote the idea of a state bank similar to the Bank of North Dakota. The decline of the US dollar due to massive deficit spending and unrestrained money creation by the fed is some call for concern. The banking group has developed contingency plans for independent state monetary policy such as state banking and currency and redirection of public funds to state banks in case of the collapse of the US Dollar. It is wise to be prepared in the face of such irresponsible monetary and fiscal policy at the national level.

Financing Health Care Proposal
Recently the Attorney General of the State, William Sorrell, promoted a tax on carbonated beverages as a way to address the obesity and diabetes epidemic that has impacted the US and Vermont as well. Several bills have been put forward to tax sugary drinks with a known connection to health problems. Some proposals have also been put forward to remove sugary drinks from the list of food items not subject to sales tax. We are pleased that our policy of "taxing bads, not goods", has been adopted by policy-makers in the state. At the current time, proposals for taxes on unhealthy consumer items are being done on an ad hoc basis. No one has done a comprehensive study of risk factors for sickness in order to calculate their costs to the health care system.

At the same Time Vermont is proposing to be the first state to adopt a single-payer or public option health care plan in order to unburden business from these costs, and to reduce overall health care spending. The consultant plans all proposed to fund the program with an overall payroll tax.

We feel that people who engage in unhealthy behavior should be held accountable for their behavior, and for the health care costs they impose on others. Therefore any funding mechanism for health care should have a funding component that is based on taxing various risk factors for sickness and injury.

We have obtained approval for a research course in fall of 2011 to do a comprehensive study of risk factors for the purpose of devising a financing plan for health care, based on taxing behavior which leads to health care expenses.

Green Scissors Report Cover
Green Scissors program report cover. The full report can be found at: www.greenscissors.com/GreenScissors2010.pdf

Purpose

When market prices do not reflect environmental costs, polluting or depleting products are consumed in greater quantities, and society must pay for these costs through taxation, regulation, lawsuits, health impacts, and other means. Green taxes and common asset fees are market-based solutions that include the true costs of depletion, land use, and pollution into the price of products, thereby correcting imbalances in consumption that result.


The financial meltdown has exposed how the use of money and land as speculative commodities resulted in near destruction of the free-market economy. Removing the financial incentives for speculation and redirecting it to free enterprise, entrepreneurship, and other creation of real goods and services is one of our goals.


Redirecting state tax money and pension funds to state banks and credit unions can enhance the local economy as shown by the Bank of North Dakota.

Scope

This project addresses climate change, peak oil, financial system instability, speculation and many issues of national importance. States are the laboratories of democracy, and Vermont has pioneered many policies such as the Regional Greenhouse Gas Initiative (RGGI) and our unique electrical efficiency utility, Efficiency Vermont. Green taxes and common assets have powerful implications for environmental enhancement, economic stability, and reduction of wealth inequality. Our program will compel inherently polluting and depleting industries to compensate Vermont citizens for the loss of ecological quality. This compensation could provide a base income for every Vermonter, helping to insulate them from events such as an economic downturn. Business will also benefit if a portion of these revenues replaces payroll taxes and other regressive taxes. If successful, this project will demonstrate to the rest of the nation and the world the power of ecological market mechanisms.

Information Dissemination

We issue publish reports, hold press events, write editorials and articles in the press, submit journal articles, and post a website.

Project Link http://www.uvm.edu/giee/?Page=research/greentax/commonassets.html

Amount Approved
$20,000.00 on 5/28/2010 (Check sent: 6/16/2010)


  Related Organizations
Gund Institute for Ecological Economics  


Cut-waste

Attachments
Cut-waste
Green Scissors Report Cover

Address
617 Main St.
Burlington, VT 05405


Phone
(802) 656-2996
(802) 656-2995 (fax)

Contacts


Gary Flomenhoft
Research Associate, University of Vermont
John Erickson
Managing Director, Gund Institute

Posted 4/1/2010 6:23 PM
Updated   6/12/2011 11:57 AM



 
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