The 'energy efficiency excise tax'

Thursday December 27, 2012

In January 2007 newly elected Senate leader Peter Shumlin declared war on the Menace of Global Warming. Shumlin said that failure to act boldly to combat the Menace will make our grandchildren's lives "unspeakably horrid". The leading component of that war on the Vermont front was to have been the creation of a new "thermal efficiency utility."

This new governmental bureaucracy was to parallel the electric efficiency utility, Efficiency Vermont, financed since 1999 by a tax on electric bills. Instead of (logically) taxing heating fuel, propane and natural gas, the utility would raise $25 million through a new tax on Vermont Yankee. This sum, Shumlin explained, would curtail waste, create jobs, and curb greenhouse gas emissions.

The 2007 legislature obligingly passed the thermal efficiency utility bill. But Gov. Jim Douglas, not sharing the Shumlin-VPIRG alarm at the Menace of Global Warming, vetoed it. The legislature let Shumlin's signature issue drop for the moment.

But now the Shumlin administration has revived the thermal efficiency utility as the centerpiece of next year's battle against the continuing Menace of Global Warming. The Public Service Department's Thermal Efficiency Task Force has unveiled a comprehensive draft report proposing sweeping new programs to educate, persuade, regulate, subsidize, mandate and tax Vermonters into spending less money on heat.

It's curious that the Shumlin administration is so determined to use all these tools to get Vermonters to spend less on heat, all the while declaiming against the very climatic effect -- global warming -- that, to the extent that it's occurring, is allowing Vermonters to spend less on heat.

A leading concern of the Task Force is that present weatherization programs only serve lower-income people. Upper-income households can afford to invest in thermal efficiency, but what about middle income families, with 80-120 percent of median income? How can the state in good conscience fail to subsidize them too?

To close this subsidy gap the report proposes a wide range of programs and services. But of course this requires new money. The Task Force's leading proposal for raising that money is a new "energy efficiency excise tax" on fuel oil, propane, kerosene and natural gas (but not biomass, since there's no easy way for the state to tax your woodpile.)

The Task Force proposes that the state collect $260 million from this new tax over next seven years. The tax would be paid by businesses, schools, hospitals and state and local governments, of course, and by the seventy percent of Vermonters who heat their homes with fuel oil or propane.

Matt Cota, executive director of the Vermont Fuel Dealers Association, pointedly argues that "we should not use a regressive tax that hurts the lowest income Vermonters, in order to fund retrofits for the richest." It's likely that the legislature would have to include yet another new rebate program to alleviate yet another regressive tax burden.

Back in 2007 Sandra Levine of the Conservation Law Foundation said "for every dollar you invest in energy efficiency, you save two or three dollars [on energy] that you would have had to buy." If so, the logical next step is for "you" to take charge and act.

But Gov. Shumlin, his Task Force, CLF, VPIRG and their Green friends in the legislature are determined that not "you", but the government, must take charge of making everyone's energy decisions - and send "you" the tax bill.

In a free society, people manage their finances in their own self-interest. Vermonters have been making energy efficiency investments at least since the 1973 oil shock suddenly raised their fuel oil and gasoline prices.

But in present-day Vermont, there are always voices clamoring to create new government programs to mandate and subsidize what government decides is the next "good thing" for everybody, and in this case extracting $260 million in new taxes over seven years to pay for it.

The Vermont Constitution states that "previous to any law being made to raise a tax, the purpose for which it is to be raised ought to appear evident to the Legislature to be of more service to community than the money would be if not collected." The "energy efficiency excise tax" on your heating fuel bill fails that test.

John McClaughry is vice president of the Ethan Allen Institute (


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