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Dr. Jonathan Lesser

by Jonathan A. Lesser, PhD

I was asked by Vermont’s Ethan Allen Institute to prepare an economic analysis of The ESSEX Plan, the most recent carbon tax proposal for Vermont. I’m quite familiar with Vermont, having lived there for 14 years and because I served as Director of Planning at the Vermont Department of Public Service during Gov. Douglas’s administration.

The ESSEX Plan proposes, when fully implemented over eight years, to impose a carbon tax on heating oil, gasoline, diesel, natural gas and propane sufficient to bring in $240 million a year.  According to the Plan, the state would use those dollars to subsidize electricity rates and give rebates to what it calls “working families” and “rural residents.”

My economic analysis of the proposal yielded these conclusions:

  1. The Plan will provide an economic incentive for Vermonters to avoid paying the tax by purchasing fossil fuels from outside the state; the higher the carbon tax, the greater will be that incentive. Preventing such behavior will either be impossible or administratively costly. Such “free-riding” behavior will also inequitably transfer monies from Vermonters who do pay the tax to those who do not.
  2. The Plan will reduce Vermont’s economic competitiveness by increasing the cost to produce goods and services, including Vermont’s famous maple syrup.
  3. Many Vermonters will be unable to afford the capital investments necessary to reduce their carbon tax payments.
  4. Electric rates will increase under the Plan, not decrease. Rebates on current electricity rates will not compensate for the Plan’s call for increased reliance on high-cost, locally-sourced renewable biofuels and solar power.
  5. The Plan will cause the cost of biofuels to increase because the demand for biofuels will increase as a consequence of the tax, harming lower-income Vermonters who rely on wood to heat their homes.
  6. The Plan’s call for developing more residential and commercial solar power using “net-metering” will benefit higher-income Vermonters at the expense of lower-income ones, who will bear increasing shares of the costs of back-up generation and the fixed costs associated with operating
  7. local utility infrastructure. Increased reliance on solar power will also mean having to pay the costs for more back-up generation and storage, which will cause electric rates to increase further.
  8. The Plan is likely to adversely affect funding to maintain Vermont’s aging transportation infrastructure, which is already underfunded. To compensate, the state will likely have to increase taxes on motor fuel, levy a tax on miles driven, or raise the state’s income tax. Alternatively, revenues raised by the carbon tax would have to be diverted from the proposed electric rebates, contrary to the Plan’s promise of revenue neutrality.
  9. The Plan will be complex and costly to administer. Retailers will have no way of distinguishing the sales to residential, commercial, and industrial customers, and the Plan is silent on how the amount of money to be rebated to electric ratepayers will be determined. Administering the Plan will require providing the state’s electric utilities with Vermonters’ confidential taxpayer information.  Connecticut estimated a similar carbon tax program would have a five percent administrative burden , meaning that the administrative costs could total $12 million per year.
  10. The Plan may increase local air pollution as more Vermonters switch to wood-burning to avoid burning natural gas and fuel oil.
  11. The Plan’s rationale, reducing carbon emissions, will provide no climate benefits whatsoever because the predicted reductions in carbon emissions will have no measurable impact on climate. Nor will the Plan encourage other states or nations to enact their own carbon tax measures.

As a onetime Vermonter who was deeply involved in the state’s energy planning, I conclude that the ESSEX Plan is premised on vague and incorrect economic assumptions.  Enacting it will damage Vermont’s economy, place an undue and unfair burden on lower-income Vermonters, and encourage more people to leave Vermont in search of better economic opportunity.

–  Jonathan A. Lesser is President of Continental Economics. He is a former Policy Director for the Vermont Department of Public Service

Dr. Lesser’s Full Report can be read HERE.

 

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by John McClaughryJohn 2

From Revolutionary days into modern times, Vermonters have championed the liberty extolled in our 1777 Constitution. Article I declared that “all men have certain natural, inherent , and unalienable rights, amongst which are the enjoying of and defending life and liberty, acquiring, possessing and protecting property, and pursuing and obtaining happiness and safety.”

That pro-liberty tradition persisted, even through the great economic, social and political changes of the twentieth century that brought ever-greater government interference in our lives.  We are now, however, well into an era where that once-vital tradition has lost much of its meaning, or receded beyond mention altogether.

A noteworthy – to some, notorious – landmark of this malign progression is a 1994 decision rendered by Vermont Supreme Court Justice John Dooley. His opinion rested on a wholly invented legal principle: “your life belongs to the State”.

The case was brought by a Northeast Kingdom motorcyclist who objected to a law requiring him to wear a helmet on the highway. Dooley ruled against his plea. He could have done so on the theory that the highways of the state belong to the public, and the public can make reasonable rules about operating on those highways – so obtain a license, wear corrective lenses, drive sober, and wear a helmet.

But Dooley, taking note of the ongoing debate about health care reform, wrote these two key sentences: “Whether in taxes or insurance rates, our costs are linked to the actions of others and are driven up when others fail to take preventive steps that would minimize health care consumption. We see no constitutional barrier to legislation that requires preventive measures to minimize health care costs that are inevitably imposed on society.”

Today’s General Assembly seems to have but a handful of members who reject the Nanny State temptations of the Dooley Principle, and actually believe that the people’s right to enjoy and defend life and liberty transcends what legislators might believe is nice or good for them. (Ironically, one of them is the biker who challenged the helmet law, Sen. Joe Benning.)

Just look at the invasions of liberty under consideration in Montpelier. The House, on a vote of 133-7, has just passed a bill forbidding Vermonters from buying appliances that the State finds to be insufficiently energy efficient. The covered appliances aren’t dangerous or harmful. They are merely deemed by the State to be uneconomic. The VPIRG advocate boasted that the ban would “protect Vermont consumers from those added energy costs”, as if Vermonters don’t have enough wit to decide how best to spend their own money.

The mandatory seat belt bill, rejected repeatedly over the past quarter century, is back. If enacted, cops could stop and ticket motorists only for not wearing a seat belt to protect themselves. (Driving unbelted has long been a secondary offense; nearly 90% of Vermont drivers already choose to wear seat belts.)

There are the new computerized vehicle inspection rules (that no one ever voted on), which automatically fail vehicles for non-safety-related defects like non-working tire pressure gauges. This burden, of course, falls most heavily on working people and the poor, who will be forced to shell out hundreds of dollars to pass inspection, or replace their cars and trucks altogether.

There’s the recurring battle over enacting a universal background check to prevent gun sales to “people who shouldn’t have firearms”. This is a vaguely defined class will go well beyond the currently prohibited transferees (felons and involuntarily committee mental patients). This requirement would make little difference to bad guys, who know better than to risk failing a background check (itself a felony). But woe to the law-abiding citizen who transfers a shotgun to a hunting pal down the street, without undergoing – and paying for – the background check.

There is admittedly no constitutional right to use the highways on one’s own terms. But Vermonters have an explicit constitutional right to bear arms “for the defence of themselves and the state.”  Vermont’s Constitution writers, familiar with British experience under the Stuart kings, unquestionably believed that that citizen right would defeat a tyrannical government’s steps toward universal gun registration, licensing, and ultimately confiscation.

Last but not least, there’s the Dooley Principle-inspired individual mandate to purchase state-approved health insurance or pay a punitive fine, now promoted by Sen. Claire Ayer and Rep William Lippert.

Conscientious legislators should commit themselves to honoring our Constitution’s bold defense of liberty. Faced with more Nanny State legislation, they should memorize this from economist Thomas Sowell: Liberty is “the right of ordinary people to find elbow room for themselves, and a refuge from the rampaging presumptions of their ‘betters’”.

John McClaughry is vice president of the Ethan Allen Institute (www.ethanallen.org).

 

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by Rob Roper

Introducing the latest carbon tax bill (H.791) to the House Energy & Technology Committee, lead sponsor Rep. Sarah Copeland-Hanzas (D-Bradford) provided an example of how this tax and rebate scheme would affect a single mother who is low income and lives in a rural region of the state. Under the ESSEX Carbon Tax, fifty percent of revenue raised would be used to lower the electric bills of all Vermonters, the other half would go toward low income and rural rebates.

Copeland-Hanzas claims that her fictitious single mother would “come out a little bit ahead” because of the low-income rebate, the rural rebate, and – this is critically important – “also because she’s smart enough to figure out how to take advantage of some of those programs that are out there that will help her transition onto renewable energy….” In other words, if one can’t afford to buy a new electric heat pump, or a bank of solar panels, or an electric or hybrid car (or at least one that gets much better gas mileage), the most financially vulnerable Vermonters will lose out under the ESSEX Carbon Tax.

The detail Copeland-Hanzas leaves out is “those programs that are out there” cannot accommodate ALL of the low income and rural Vermonters, smart or not. Most will be left out in the cold.

Sen. Chris Pearson (D-Chittenden), lead sponsor of the senate companion bill (S.284) was challenged by a colleague in the Vermont Climate Caucus, who noted, “In terms of the effect on low income Vermonters, it seems like in the best case scenario your gas bill goes up, you’re electric bill goes down, you might be even. But it seems to me, if you’re among the most wealthy Vermonters you can easily save a lot more than lower income [Vermonters] because if you have fossil fuels heating your home, you can go out and buy a pellet stove, you go buy heat pumps, you can go buy a Tesla. You won’t even notice the bump in your budget, and you’re… reaping all the benefit. How does this benefit low income Vermonters?”

Pearson replied, “Yeah, it would be a good problem to have if wealthy people stopped burning fossil fuels to heat their homes and drive around. I mean, that IS the goal.”

Reaching that goal under the ESSEX Carbon Tax means the only people paying the carbon tax would be Vermonters who lack the financial capital to invest in some very expensive energy efficiency technology. As such, poor Vermonters stuck with gasoline powered cars, oil burning furnaces, etc. will end up subsidizing the electric bills of their better off neighbors who can afford Priuses, solar panels, weatherized homes, electric heat pumps and the like. Tax the poor to subsidize the rich. Great plan (not!).

- Rob Roper is president of the Ethan Allen Institute.

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By John J. Metzler

UNITED NATIONS—Back in Ronald Reagan’s time, the underlining philosophical mantra of the extraordinary economic expansion was that “a rising tide lifts all boats.”  Namely, as entrepreneurialism and enterprise were encouraged, the results would create the rising tide of progress.  But later, in the early 1990’s slowdown, President Bill Clinton rose to power on a  simple but still memorable quip floated by his communications guru James Carville, “It’s the Economy Stupid.” Such remains a tried and true political dictum.

The International Monetary Fund (IMF) predicts wider global growth based on the expanding American economy.  Despite the chafe and flying feathers from both Twitter storms and the   usual Congressional gridlock, President Donald Trump has created the conditions for the rising tide; high Consumer Confidence, Business Confidence and both business and personal tax cuts.  The stock market has soared.

The undertow of unemployment which was a bane of the previous Administration has turned and now the U.S. jobless rate stands at a seventeen year low of 4.1 percent.  Significantly, 2.5 million jobs have been created, 200,000 in the crucial manufacturing sector alone.   The American economy grew at an impressive 2.3 percent in 2017.

As the President touted in his State of the Union Address, “This is our new American moment. There has never been a better time to start living the American Dream.”

Nonetheless, the ill-winds of Protectionism can whip up a gale even on seemingly calm waters.

I’m not talking about our lopsided China trade in which last year’s deficit with Beijing reached $344 billion, only a bit smaller than the high of $375 billion in 2015.

Trade pacts have predictably come under suspicion.  President Trump stated, “The era of       economic surrender is over…  From now on we expect our trading relationships to be fair and to be reciprocal.  We will work to fix bad trade deals and we will negotiate news ones.”  While specifically not mentioning China, nor the NAFTA deal with Canada and Mexico, the underlying tone echoes protectionism.

Take the North American Free Trade Agreement (NAFTA), adopted by the Clinton Administration in 1994.  There’s huge cross border commerce with both Canada and Mexico.

Yet NAFTA is being renegotiated.  Just a day after the State of the Union, Canada’s Foreign Minister Chrystia Freeland was here in New York and fully conceded NAFTA should be     “modernized and improved.”  She cited the example of cross border auto parts trade in which NAFTA provisions still deal with Cassette Decks in new cars!

Speaking at the prestigious Council on Foreign Relations, Minister Freeland views trade pacts as a “win-win” and not “a Zero-sum game; one guy wins one guy loses.”  She stressed, “We really sincerely think a trade relationship is a Win-Win…Why would you Trade if it was not good for both parties?  We’re kind of like Adam Smith there.”

She claimed that amid tough negotiations with the U.S. her government has a “Plan A,  but we have a Plan B , C, D, E and F too.”  In other words, Ottawa really wants a continued deal with Washington. Canada is the world’s tenth largest economy.

The U.S. trade with Canada stands at $535 billion with a small deficit of $15 billion last year.

Bilateral trade with Mexico reached $512 billion with a manageable deficit of $66 billion.

But China has now displaced Canada as the USA’s largest trading partner.

Viewing the bigger picture of trade and foreign policy Minister Freeland asserted, “We think the world is stronger when the U.S. is at the table.” Fully Agreed.

But what of the Elephant in the Room? India’s economy has seen a growth spurt and now stands proudly as the world’s Fifth largest economy!  The positive can-do policies of the

Modi government combined with the hard work and entrepreneurialism of the Indian people have brought about this milestone.  India was once shackled with burdensome state socialism; today there’s a growing commercial spirit.

India has surpassed both the United Kingdom (the former colonial power) and France to edge into Fifth Place. That’s standing in the lineup with the USA, China, Japan, Germany and India.  Talk about a changing world!

Expanding U.S. trade with India has reached $68 billion with a $21 billion deficit.

Seen another way, the NAFTA deficits stand at $81 billion, again a shadow of the $344 billion imbalance with China!  While massive trade deficits pose a threat to national security as well as    financial strength, free but fair trade, will speed the flow of commerce and offer workers a win-win deal.

John J. Metzler is a United Nations correspondent covering diplomatic and defense issues. He is the author of Divided Dynamism The Diplomacy of Separated Nations:  Germany, Korea, China.

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In his October 11, 2017, address Governor Scott noted: “If we want to protect the public investments we value, and if we want to make more of them, we must reverse the decline in our workforce. The slow growth in Vermont’s economy, the decline in Vermont’s working-age population and tightening labor market conditions don’t allow us to be complacent.” A big step forward in this regard would be to reform and liberalize Vermont’s occupational licensing requirements.

The Institute for Justice’s 2017 publication License to Work, 2nd Edition studies 102 lower-income occupations (those that “made less than the national average income” according to the Bureau of Labor Statistics) that are licensed in at least one state. The report looks at 5 types of licensing requirements for each occupation: fees, education and experience, exams, minimum grade of schooling completed, and minimum age.

According to the report, Vermont licenses just 31 (see chart) of 102 lower-income licensed occupations (30.4%), second fewest to Wyoming with 26 of 102 (25.5%), which is good. However, in terms of “Average Burden of Licensing Requirements” we do much worse. In other words, for the occupations that we do license, our occupational burdens are unusually onerous. Our neighbors, New Hampshire, Maine and New York are all less burdensome than Vermont.

Low Income VT Licensing

Here’s one example: In Vermont, a cosmetologist is forced to complete 1500 hours (that’s 188 eight-hour work days) of education before beginning their job cutting and coloring hair. On average, states that license cosmetologists require a fee of $177. Vermont’s fee is more than double that: $360. The time and expense is unfair to the worker as well as to Vermont consumers who cannot legally pay him or her for services.

By lightening the licensing load, we can remove barriers to in migration and encourage workers from other states to come to Vermont. According to a Brookings Institute article, workers who are under 35, the age demographic Governor Scott is targeting, are 20% more mobile if they are in an unlicensed profession as opposed to one that requires a license. As far as keeping young Vermonters in state, they will be more apt to remain if they knew they could begin work immediately, rather than beginning the long slog of fulfilling a licensing requirement.

Therefore, the less licensing we have, the more skilled workers from other states will want to come (especially if these other states have dramatically more onerous licensing requirements), the more young workers we can keep, and the Vermont’s tax base will be larger.

So, how can we improve our ranking? Refusing to license more occupations would be a good start. Representative Mark Higley (R-Orleans-Lamoille) wrote on editorial explaining how regulators are trying to impose a licensing fee on residential contractors. Since residential contracting is considered a lower-income occupation in the IJ report, a more stringent regulation will have an outsized impact on Vermonters who are just getting by. In 2017, Phil Scott emphasized the need to focus on helping Vermonters in trade schools (many of whom may go into contracting work). I can’t think of a better way to help these Vermonters than to ensure they have an immediate path to employment after graduation.

Proponents of strict and broad licensing laws argue that they are necessary for quality control. But, in this day of YELP, Angie’s List and other crowd-soured, social media rating systems consumers are better armed than ever to police quality of service without the need for government, especially regarding occupations which pose no threat to consumer safety, i.e., barber and auctioneer. And, If Vermonters are not comfortable with unlicensed practitioners, there are far less onerous options for protecting consumer safety than the extreme of licensure, such as voluntary certification.

We should consider updating these licensing laws to reflect our commitment to offering the widest range of employment options to low-income Vermonters, which would in turn grow our economy.

The choice is not just between “competition” or “licensure.” We owe low-income Vermonters the chance to work without needless impediments. If we roll back occupational licensing, Vermont will have a stronger labor market and economy as a result.

License Triangle

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by Rob Roper

Chris Miller, who works on the Social Missions Committee at Ben & Jerry’s, testified to the House Energy & Technology committee that his company is firmly in favor of the Carbon Tax bills (H.791/S.284) based on the ESSEX Carbon Tax plan. Why? Because Ben & Jerry’s, which is owned by the British/Dutch company Unilever, will make out like bandits.

Miller shared estimates that the ice cream manufacturer would receive over $800,000 in electricity subsides if the ESSEX Carbon Tax were to become law. This he described as “obviously not insignificant.” True enough.

The way the ESSEX Carbon Tax works is distributors of fossil fuels (gasoline, diesel, heating oil, propane, natural gas, etc.) would pay an excise tax (a cost that will be passed along to customers) into a fund that will be handed over to Vermont’s electricity providers to “reduce” electric rates. Ben & Jerry’s uses a lot of electricity and very little fossil fuels, so they will enjoy all the benefits of the subsidy but bear little burden of the tax. Great for them.

However, as Rep. Robert Forguites (D-Springfield) astutely pointed out, the ESSEX Carbon Tax does not actually lower the cost of electricity, it merely provides a subsidy that creates the illusion of lower costs – as subsidy that someone has to provide the money to cover.

So, what’s really going on under the ESSEX Carbon Tax is that other Vermont businesses will be forced to pay $832,000 of Ben & Jerry’s electric bill. Who? Businesses that do rely on fossil fuels, such as plumbers, electricians, contractors and other folks who depend on trucks and vans to reach their customers, general stores that heat with oil, etc. and so on. This is an extremely regressive, anti-small business proposition.

Rep. Corey Parent (R-St. Albans) asked if Ben & Jerry’s wouldn’t end up paying more in taxes through the delivery trucks they use for distribution. Miller pointed out that Ben & Jerry’s does not own its own trucks, they use a third party for distribution, so, no they would not be paying any tax directly. Nor indirectly as the companies they pay to move their ice cream around the country are, for the most part, not based in Vermont. Miller said he would be surprised if these subcontractors  would ever buy their fuel in the Green Mountain State. Who would, given an extra 40 cent per gallon carbon tax on diesel – if you’re big enough or flexible enough to avoid the tax?

All this just goes to prove the old adage: a policy that robs Peter to pay Ben & Jerry’s can always count on the support of Ben & Jerry’s.

Rob Roper is president of the Ethan Allen Institute. 

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By Rob Roper

The Vermont House Committee on Energy and Technology will start taking testimony on the ESSEX Carbon Tax bill today. Here are some questions our legislators (and all Vermonters) should ask regarding the bill….

What’s the real benefit here?

662. (1) Allocation to classes. The mechanism shall allocate the total revenues received by the collection date among three customer classes, based on the estimated percentage contribution of each class to those total revenues. The classes shall be commercial, industrial, and residential.

Q. What percentage of the total revenue collected (50% of the estimated $240 million when fully implemented, will be allocated to each class? How much will be available for residential customers vs. commercial and industrial? What’s the real potential financial benefit to average Vermont families on their electric bills vs. increased costs for driving and heating their homes? It would appear to be pretty minimal.

662. (iv) With the monthly bill to a customer who has demonstrated eligibility for this income-based rebate, the provider shall include a check to the customer if,…

662. (c) … A person seeking one or both of the rural residential and income-based rebates established under this section shall demonstrate eligibility. The Commission shall create a mechanism to be used for the self-certification of eligibility for these rebates.

Q. The implications here are that rural and low-income Vermonters will have to actively apply for these rebates, and update that application on a monthly basis. A) does this mean that Vermonters who don’t apply for these rebates will not receive them? B) This logistical burden on low income and rural Vermonters appears daunting. Is this really fair?

Cost of Implementation

Q. Given the above language implying that rebate seekers must demonstrate eligibility and continue to do so on a monthly basis, tracking and verifying this information by the state and effectively communicating it to electricity providers would appear to be an incredibly complicated bureaucratic process on a level exceeding that of Vermont Health Connect – a program that has cost taxpayers hundreds of millions of dollars to implement. How much is this Carbon Tax going to cost to collect, distribute, continuously track, and enforce? If, as the statement of purpose asserts, the goal is to “to return all of the revenues from that charge to customers on their electric bills,” where will the revenue come from to do this?

663. (a) The Auditor of Accounts of the State may conduct audits of the activities under this chapter to ensure that all of the monies raised by the carbon charge are returned to customers. The Auditor shall conduct two such audits… (b) The Auditor and his or her authorized representatives may at any time examine the accounts and books of a Vermont retail electricity provider 3 relating to this chapter, including its receipts, disbursements, contracts, funds, 4 investments, and any other relevant matters.

Q. What are the estimated costs of these audits? Again, as noted above, where will the money come from to pay for them?

663. (a) … A Vermont retail electricity provider shall show each rebate received by a customer pursuant to section 662 of this title as a separate line item on the customer’s bill…

(e) In addition to the duties specified in this 12 chapter, the Commission may specify such other duties of retail electricity providers that it considers necessary in implementing this chapter.

(c) … A Vermont retail electricity provider shall have the opportunity to recover in retail rates its necessary and reasonable expenses, other than rebates, in implementing this chapter.

Q. This language seems to understand that retail electricity providers will also have considerable cost burdens associated with implementing this Carbon Tax and authorizes them to raise their rates in order to cover these costs. What are the estimated costs to providers, and what are the implications for electricity rates. Is this really just a scheme of putting money into one pocket of Vermonters (if they apply for rebates) while taking it out of another?

 Q. Will this Carbon Tax, especially in its early phases, cost more to collect that it will take in?

General Questions

The Transportation Fund. If this Carbon Tax works as intended and people use significantly less gasoline and diesel for transportation, what will be the impact on Transportation Fund revenues? Will revenue from this tax necessarily have to be utilized to pay for roads and bridges? Or will another tax have to be raised to offset losses in the T-Fund? In either case, how can this Carbon Tax be honestly called “revenue neutral?”

Winners & Losers. Global Foundries and the ski industry are named in the ESSEX Plan document as potential big winners in this scheme. Ben & Jerry’s has presented that it will be a big winner. Who are the losers? Landscaping businesses that rely on pick up trucks, lawn mowers, chain saws, etc.? Plumbers, electricians, contractors, etc. with vans and customers that require driving many miles? Are we looking at a program that subsidizes large, wealthy companies at the expense of small, blue collar workers?

Revenue Neutrality. Proponents of this Carbon Tax tout that it is “revenue neutral.” If the money to cover the costs of implementing this Carbon Tax do not come from the revenues generated by the tax, where will they come from, and how much are they expected to be?

Climate Change. In its Statement of Purpose this bill says one of its objectives is “to address climate change.” What real world impacts will this bill have on mitigating future temperatures and future extreme weather events in Vermont, if any?

Rob Roper is president of the Ethan Allen Institute

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by John McClaughry

The push is on again for converting your transportation to electric vehicles.

Leigh Seddon, chairman of the Energy Action Network, said two weeks ago “We need to have a 24 percent reduction in fossil fuel use between now and 2025”. The state’s comprehensive energy plan has a target of 40,000 electric vehicles by 2025, a significant increase from around 2,000 today.

He said that tax incentives were offered on a certain number of vehicle sales from automakers, and once the limit is reached, the incentive expires, and the state may have to put up funding. “There really needs to be a state policy that can help pick up that incentive,” Seddon said. “One of the policy pitches was a fee-based schedule that [incentivizes] efficient cars like electric vehicles and puts a tax on inefficient cars.”

Well, there they go again. Let’s put a tax on gasoline and diesel fueled cars and trucks – like the one you’re probably driving – and heap another handout on electric vehicles, which aren’t paying squat toward maintaining our highways and bridges, and are even sucking up taxpayer financed electricity at state-financed recharging stations.

And if we go from two thousand electric vehicles today to forty thousand, that’s going to take a good bit more grid power, unless the vehicle owners have their own wind and solar chargers hooked up to their car batteries.

Nothing against electric vehicles, but I can’t see making everyone else pay for them.

John McClaughry is vice president of the Ethan Allen Institute

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By David Flemming

Environmentalists like to claim that Vermonters won’t have to sacrifice the economy to enact the ESSEX Plan. But if the past 5 years is any clue, our environmental focus has cost the economy dearly, suggesting that Vermonters should reject ESSEX if we want to regain our economic strength.

The ESSEX Plan released in November reads: “since 1990…the state has reduced its carbon pollution emissions by almost 13%, while Vermont’s real GDP has grown by almost 23% – the fastest rate in New England…It makes economic sense to build on that success.”

That sentence is key to establishing the ESSEX Plan’s credibility. To paraphrase: ‘in the past, legislative action intended to protect Vermont’s environment has also inadvertently grown Vermont’s economy faster than our neighboring states. Therefore, if Vermonters support the ESSEX Plan to protect the environment, Vermont’s economy will grow faster than it would have otherwise.’

According to the Bureau of Economic Analysis (the official source of GDP data) “Gross domestic product (GDP) by state is the market value of goods and services produced by the labor and property located in a state.” While GDP is not a perfect measure of what “makes economic sense,” there are no comparable alternatives for measuring the overall size and growth of state economies.

I hoped that the ESSEX Plan would use BEA data when comparing the GDP between New England states, but the “Select Bibliography” on the final page of ESSEX is indeed ‘select.’ It makes no mention of where it obtained GDP data.

So, we will have to start from scratch. I planned on downloading the BEA state GDP data on an annual basis for each of the New England states from 1990 to 2016 (2017 data is not available yet). Sounds simple, but before I had downloaded the data, I was met with a cautionary note: from the BEA: “There is a discontinuity in the GDP-by-state time series at 1997, where the data change from SIC industry definitions to NAICS industry definitions…. Users of GDP by state are strongly cautioned against appending the two data series in an attempt to construct a single time series for 1963 to 2016.” So if the ESSEX folks did not use BEA data, the question is “why not?” and if they did used BEA data,  “did they not realize that the data from 1990-1996 is not comparable to the 1997-2016 data?”

To avoid the ESSEX mistake, I will look at data going back to 1997 instead of 1990. From 1997 to 2016, Vermont’s GDP growth has averaged in the middle of the pack, growing 40.6%, which is actually more than the 23% claimed by ESSEX. Massachusetts had the top rate at 51.4%, while New Hampshire also exceeded Vermont at 45.9%. Vermont has not had the “fastest (growth) rate in New England,” as ESSEX claims.

Vermont’s ‘growth’ in recent years has been even less promsing. We’ve actually fallen behind both Rhode Island and Maine in the 5 year time span of 2012-16 (who we were ahead of in average GDP growth from 1997-2016), meaning that the only state we’re ahead of in GDP growth during the past 5 years is Connecticut. And that is only because Connecticut’s economy actually shrunk 0.3% from 2012 to 2016.

Our environmentalist neighbors have not been good stewards of Vermont’s economy in their efforts to curb carbon emissions, despite their claims otherwise. If we cannot trust them to make simple calculations like GDP, can we really trust them to implement the ESSEX Plan and levy taxes on every household in Vermont that uses fossil fuels? The answer for me is a clear ‘no.’

GDP 97-16

GDP 12-16

 

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By Rob RoperRob Roper

We have some pretty serious issues facing our state: a shrinking workforce, a public school system that is hemorrhaging students while it vacuums money, and a structural state budget deficit, to name just a few. These problems are not new, and the policies our state government has enacted to address them have not worked. Vermonters are now among the most highly taxed people in the country, but what do we have to show for it?

Today we spend roughly $1.6 billion to educate 77,000 K through 12 students. That’s well over $20,000 per child, more than almost every other state in the union and nearly twice the national average. This is more than twice the total we paid before Act 60 became law in 1997, despite serving 30,000 fewer kids in 2017.

Student outcomes are not improving, and, if anything, they are declining. In the latest round of standardized tests, only 48 percent of Vermont’s students were learning enough to be considered proficient in their subjects. In every category in every grade but one, scores fell between 2016 and 2017.

This, despite programs mandating and expanding universal pre-K, “proficiency based” learning, and spending $31 million to incent school districts to consolidate in order to, no joke, save money. If nothing dramatically different is done in the next few weeks, we are looking at a 9 percent property tax increase.

Vermont has implemented many wealth redistribution programs to ostensibly help the poor. We have the most progressive income tax in the nation as well as the most progressive property tax system. Vermont spends more money per capita than all but just five other states. A single-parent family of three in Vermont receives Temporary Assistance for Needy Families (TANF) that is 51 percent higher than the national average. Roughly 35 percent of Vermonters receive some form of Medicaid. Our $10.50 state minimum wage is already in the top five highest in the country, and a 2013 study by the Cato Institute calculated a typical welfare benefit package family was worth $37,705, or the equivalent of a pre-tax wage of $42,350. This puts us in the top 10 “most generous” suppliers of welfare.

But despite all this, Vermont was the only state in 2016 to see a rise in the number of citizens living in poverty, according to the U.S. Census Bureau. According to the Vermont Foodbank, 83,630 Vermonters are “food insecure,” including 24,530 children. The Public Assets Institute recently reported, “Income inequality is getting worse — most Vermonters are not sharing in economic growth.”

Vermont is a wonderful place to live. But despite everything our state has to offer in terms of scenic landscapes, clean air, healthy and safe surroundings, etc., ours is one of only three states since 2010 to have actually lost population.

What is happening that fewer people want to live in the greatest place there is to live? Political historian Michael Barone most know, as the author of “The Almanac of American Politics,” recently explained that this “can be chalked up to Woodstock-era migrants — Bernie Sanders, Howard Dean. They’ve liberalized the state’s culture and politics, so with the state’s high taxes and stringent environmental bans, no one is following.”

Indeed, beyond the direct government forays into our paychecks, Green Mountain Power customers will see a 5 percent rate increase due to progressive, renewable energy policies, and the Green Mountain Care Board approved a 9 percent increase for Blue Cross Blue Shield health insurance, no thanks to a phalanx of progressive-minded health care laws — including the one that created the same Green Mountain Care Board supposedly to rein in costs!

So given the true challenges facing our state, it is a bit frustrating to see the Legislature immediately take up, of all things, the legalization of marijuana, passing the bill before even reading the study they ordered last year. After that, it’s more items off the same menu of failed ideas. House and Senate leaders proclaimed their priorities will be to increase our already high minimum wage to $15 an hour, and to pass a government-run, government-mandated paid family leave insurance program that is so attractive on its own merits that proponents admit if people weren’t forced to participate, no one would buy it.

Does anybody really think these measures are going to solve any of the serious problems facing Vermont? Rather than waste time trying to determine which next big government bell or whistle is the one that will finally cause the population tide to rise, why not figure out what it is you’re already doing to scare people off. Then stop. If we want to turn our state around, that means by definition we will actually have to change direction.

– Rob Roper is president of the Ethan Allen Institute.

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The Ethan Allen Institute is Vermont’s free-market public policy research and education organization. Founded in 1993, we are one of fifty-plus similar but independent state-level, public policy organizations around the country which exchange ideas and information through the State Policy Network.
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