The ESSEX Plan: Counting the Costs

By Rob Roper and David Flemming

Proponents of the latest Vermont Carbon Tax scheme, called the ESSEX Plan, have severely underestimated the ease with which Vermont can implement the proposal.

Johanna Miller of Vermont Natural Resources Council says that ESSEX “is intended to be built off our distinct infrastructure and pretty easy to administer, thereby not having too significant of a cost. All of the dollars raised going to into a escrow account, the utilities could then just take that financial benefit, monetize it, and pass it on to their 3 customer classes: residential, commercial and industrial.” The designers claim that “there is no cross-sector subsidization under The ESSEX Plan.” But keeping the money separated in these silos would be anything but simple.

Think about it. The state has to collect this tax – an excise tax – from the distributors of fossil fuels, not the end users. How does the distributor know who the end user is? For example, a gasoline distributor pays the tax, then sells the gasoline to a gas station, who sells it to… who exactly? Someone driving their kids to school (residential), or a contractor filling up a work truck (commercial). How is the state supposed to keep the taxes collected from these different uses separate?

Then the state puts these tax monies into an escrow account for the utilities to draw on, and the complexity really begins.

In addition to keeping those silos separate, the utilities have to break them down further into 4 additional categories of residential customers who qualify for certain kinds of rebates which depend on resident location and income.

To give just one example of the administrative difficulty, take the low-income rebate. The ESSEX Plan proposes a 400% federal poverty level threshold to qualify for the low income rebate (about $90,000 for a household of 4). The key proponents of the plan do not indicate how often they intend to require Vermont’s tax department to report a family’s income to whatever government agency will be overseeing the utilities who calculate the rebates. This creates a dilemma.

If the low income rebate eligibility is only recalculated every so often, you could have a situation where a family receives the low-income rebate long after an increased income would have disqualified them. In the other extreme, if the utility companies must wait for tax information from for all hundred-fifty odd thousand Vermont families before completing eligibility calculations, the cost of administering the program could far exceed what its designers had envisioned. The designers have not even attempted to estimate the cost of calculating the low income rebate, let alone the entire ESSEX program. No doubt some of these questions can only be answered after trial-and-error. But these trials can only be completed by taking even more of taxpayers’ money.

Of course, no ratepayer will actually see these calculations that determine their eligibility for the rebates. They will just have to hope that the utility companies overseen by bureaucrats got it right.

Again, anything but “pretty easy.” So, as with most government redistribution programs, the ESSEX plan will rely on a host of bureaucratic functions to collect the tax and administer the program.

{ 1 comment… read it below or add one }

John Mahaffy December 21, 2017 at 3:56 am

Right on again, Rob. Keep on jousting at those wind turbines, Mr. Quixote; doesn’t accomplish much, but, damn! it sure makes me feel like maybe there are a few Vermonters out there who aren’t total, vacuous idiots!

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