- 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.
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.
Grant Report 2011-2012
In 2011-2012 some major progress was made at the state level. The concept of a new indicator of economic progress for the state incorporating environmental and social considerations, the Genuine Progress Indicator (GPI), was first introduced in our 2009 Green tax report (page 4). The state recently submitted two bills (H.541 and S.237), which have passed the state Senate and are heading to passage in the House. to have the Gund Institute prepare an annual GPI report. Project manager Gary Flomenhoft provided crucial information to bill author Anthony Pollina throughout the summer and fall of 2011, and recruited Gund Fellow Eric Zencey, who taught the GPI course at UVM. Representative Chris Pearson reintroduced the Vermont Common Asset Trust (VCAT) Bill (H.385) in 2011. Fees for extraction of groundwater continue to be considered.
We engaged in a monetary policy committee advocating for a public bank to enhance funding of environmental and social goods, and a bill for a state bank study was introduced in the House and Senate (H.542 and S.204). A state bank and other state level monetary policies can help mitigate financial instability caused by speculation and asset bubbles on Wall Street. These policies have helped North Dakota maintain a strong free enterprise system through out the financial crisis, unlike other states. Flomenhoft provided state Representative Suzy Wizowati with background information and model legislation for the bill she introduced.
We published our report on Subsidy Reform and were invited to testify to the House Ways and Means Committee about funding from removing perverse environmental subsidies such as the tax exemptions for residential fuels. Project Manager Gary Flomenhoft testified on Wednesday, April 11 to the Vermont House Ways and Means committee about the Subsidy Reform Report.
“Perverse subsidies” are defined as subsidies that are judged to be detrimental environmentally or economically. Often they work against other policy priorities of the state such as subsidies for fossil fuels, while simultaneously promoting renewable energy.
Pew Charitable Trusts define subsidies as direct expenditures, tax breaks, risk transfers, and government contracts for special industries. Student researchers looked at tax breaks in personal and corporate income, sales taxes, Property taxes, and natural resource taxes, and some appropriations in transportation, education, and energy. They found detrimental subsidies could amount to as much as $117.9 million.
The report found the biggest ticket items were tax exemptions of $30-60 million for capital gains that have not been audited, $20.1 for agricultural inputs that may pollute the lake, and $44.3 Million for residential fuels, primarily oil and kerosene.
The state spends $50 million on the Clean and Clear Program to restore rivers, streams, and lakes due to phosphorus and nitrogen pollution, while simultaneously exempting fertilizers containing these compounds from sales tax. This policy is noted as contradictory.
While a job creation program variously known as EATI and VEGI has been audited frequently and often found wanting, the capital gains tax exemption has never been audited to find out if it has produced investment and jobs in Vermont. Consultant Doug Hoffer said this provides tax breaks of $17 million to residents making over $100,000 per year, and $4 million to those with incomes above $1 million per year.
The tax break for residential fuels was noted earlier by the Blue Ribbon Tax Commission. The exemption is not means tested, and works in direct opposition to the policy of the state to develop a renewable energy requirement of 90% by 2050. Vermont is also losing federal LIHEAP heating assistance. The report recommends that the tax break, left over from the 1970’s, be eliminated and revenue used for deficit reduction ($22 million), weatherization ($11 million), and low income heating assistance ($11 million). $22 million would eliminate the current budget “gap”.
On February 24, 2012 Project manager Gary Flomenhoft gave a presentation to the Climate Caucus of the House Natural Resources Committee. On March 2, 2012 Flomenhoft gave testimony to the transportation committee about funding from user fees, environmental fees, and land value capture policies. He was invited to serve on a study committee for Transportation funding in late 2012.
Most noteworthy perhaps, the city of Newport voted to endorse land value taxation in their downtown district, which we have advocated for seven years. This was achieved by working with their planning director, Paul Dreher who is a national leader in form-based code. The next step is to obtain enabling legislation from the state legislature. Working with the director of "Smart Growth" at VNRC we will be crafting legislation to be introduced in early 2013. Former Smart Growth Director Noelle MacKay was appointed to the governors administration, and is a supporter.
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.
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.
(Check sent: 7/5/2011)