The Carbon Tax: the Big City 'Incentivizes' Rural Vermonters

Vermonters have become guinea pigs for special interest groups to experiment with efforts to "save the planet."

Progressive legislators, interest groups, and government entities are clamoring to impose their utopian climate change agenda on Vermont’s citizens when the legislature commences its 2020 session. There are numerous Achilles heels in these well-laid (if foolish) plans, and they are easy to spot -- ineffectiveness; damage to the economy; inequality; government bloat.

A key watchword in 2020 will be “incentivizing.” Taxpayers must snap into alertness whenever they hear this shifty expression, because it masks true intent. In Orwellian fashion, the word generally is presented as a positive, when in fact it is always a negative. An accurate definition of the word in this context would be “changing behavior by government compulsion.”

For example, the current proposal for Vermont under the Transportation and Climate Initiative (TCI) is to add 5-18 cents per gallon in tax to Vermonters’ fuels. Proponents argue that this gas tax will “incentivize” citizens to drive less: a sin tax. But who in the world thinks that an 18-cent-per-gallon “incentive” will curb consumption? Advocates argue that it is axiomatic that a higher cost will reduce consumption -- but gas averaged $3.99/gallon nationally in May 2011, and is now only about $2.60.

A degree in rocket science is unnecessary to see where this leads. Once the 18 cents per gallon (presented now as a mere pittance) fails to impact consumption behaviors, the progressives will be back, explaining that the tax must be raised to achieve that goal -- even though many low-income Vermonters are already squeezed to breaking point and use gas to travel to work. The question then becomes how much legislators tax Vermonters to “save the planet.” But the tax will only go up, always with the moral clarion call of saving the children.

The other end of the “incentivizing” scam comes when the government bureaucracy decides how to spend the money extorted through the gasoline and fuels taxes. The proposal is that the money will be invested in part to “incentivize” the purchase of electric vehicles. These vehicles perform poorly in cold, rural environments. Yet even if they did perform adequately, this scheme is patently unfair. As wealthy Vermonters are given an “incentive” to purchase a brand-new $40,000 car in the form of subsidies, perhaps through a sales tax exemption (one proposal), poor Vermonters will not be able to “take advantage” of these programs, and will still pay the same old sales tax every time they muster the meager funds to get another used vehicle. The wealthy receive a beneficial (and optional) incentive to purchase; the poor pay the tab via forced subsidization.

In its January, 2019 discussion of these complex issues, Resources for the Future (“ independent, nonprofit research institution in Washington, DC”) assesses the economic impact of various options:

When revenues are used to finance electricity subsidies, the change in economic welfare is about 20 percent smaller than the change in the policy with rebates; the subsidies reduce the economic impact of the carbon price by reducing the price of electricity…. Rural households are generally worse-off than urban households due to their higher share of energy expenditures, but the difference is not generally substantial. And, to the extent that rural households are also low-income, they may still be made better off (as discussed above).

Note the “may still be made better off” vagueness. But if “revenues are used to finance electricity subsidies,” recipients will be “incentivized” to use more electricity, won’t they? What of those many Vermonters who live off grid or purchased solar panels -- they will be denied the electricity subsidies they were compelled to pay others who are still using grid power. Resources for the Future also advocates for reductions in wage taxes to offset carbon taxes. But wouldn’t that just give people more money to offset (afford) that gas tax -- that is, cancel out that mysterious “incentive”? It would also provide a windfall to wage earners who use mass transit or don’t drive a vehicle, and who thus never contributed toward the “revenues” being redistributed. And what is being contemplated is not chump change -- “A carbon pricing policy could generate $74.7–$433.8 million in annual [state government] revenue in 2025, depending on the carbon price amount and number of sectors covered.” This enhances state coffers at the expense of economic welfare.

As Vermonters hold their breath in hopes that Governor Phil Scott will “hold the line” on these massive new tax and regulatory initiatives, they should recall who took their state over that line. As Resources for the Future crafts Vermonters’ economic future for them, it identifies who opened the door:

In July 2017, Governor Scott issued Executive Order No. 12-17 to create the Vermont Climate Action Commission (VCAC), a committee of 21 representatives from a range of both for-profit and nonprofit organizations and various state, regional, and local government agencies. The governor directed the commission to “draft and recommend, for the Governor’s consideration, an action plan aimed at reaching the State’s renewable energy and greenhouse gas reduction goals while driving economic growth, setting Vermonters on a path to affordability, and ensuring effective energy transition options exist for all Vermonters.”

Where could this Executive Order ever have led but where Vermont now finds itself, with bureaucrats and out-of-state “independents” dictating our farms’ and forests’ futures? Vermonters are fatigued by the false mantra that imposing regulatory costs “drives economic growth” -- ask Vermont’s Rutland County businesses, who were recently informed they must pony up $300 million to retrofit all paved surfaces exceeding three acres in area, to prevent surface stormwater run-off. The progressives call this “economic growth,” citing the local contractors who have the (optional) opportunity to earn $300 million to perform the mandated excavation and construction work. (One wonders what the climate impact is of re-paving all that acreage!). There is currently no government funding of this mandatory implementation: a number of longstanding businesses are threatened with bankruptcy. The contemplated fuel taxes employ the same foggy logic: that taxing people for driving is beneficial, because the money will be used to “drive economic growth.”

The governor’s phrase “setting Vermonters on a path to affordability” is also getting tiresome, since all carbon tax studies acknowledge the inherent regressiveness of these taxes -- they hurt the working poor the most. This is why all carbon tax proposals strive to redistribute the wealth they admit they are taking from the poorest of our citizenry -- to incentivize us all!

This is the tip of the carbon tax regulatory iceberg: it is far from melting. In 2020, Vermonters will hear much about “incentivizing” their conduct, and will learn how mammoth this bulging iceberg has become. Much like paying $10,000 each to out-of-staters to relocate to Vermont, these shenanigans must be called to a halt -- voters must be incentivized to vote in 2020.

Vermonters are done being the guinea pigs for social and economic experimentation -- Resources for the Future should focus on cleaning up the ecosystem in stinky D.C. After they get all their “incentivizing” worked out down there, they can vacation in Vermont, where the air is already clean.

Originally published at American Thinker, December 26, 2019.