1. VT Green Tax Shift & Common Asset Fund Dec. 7, 2004 UVM Green Tax course Public Administration 395: Melissa Bailey Thomas A. Benoit Sr. Amanda Dow Davis John Demeter Cheryl L. Diersch Gary Flomenhoft, Instructor Peter M. Freeman Andrew Jope John Mejia Rachel Marie Weston http://www.uvm.edu/~gflomenh/GRN-TAX-VT-PA395/

2. “There is nothing more difficult to carry out, more doubtful of success, nor more dangerous to handle, than to initiate a new order of things. For those who would institute change have enemies in all those who profit by the old order, and they have only lukewarm defenders in all those who would profit by the new order.” ---Nicolo Machiavelli, 1490

3. WHAT ARE GREEN TAXES? "PAY FOR WHAT YOU TAKE, NOT FOR WHAT YOU MAKE" "TAX WASTE, NOT WORK” Tax Nature, NOT Labor or Capital Environmental protection Economic Efficiency Using market incentives

4. Survey-EU Green taxes

5. EU Types of Green taxes

6. NW GREEN TAX SHIFT

7. Inventory of NE GREEN TAXES Source: Janet Milne, Env. Tax Policy Inst., Vt. Law School

8. NE GREEN TAXES Source: Janet Milne, Env. Tax Policy Inst., Vt. Law School

9. NE GREEN TAXES

11. CURRENT VERMONT GREEN TAXES

12. GREEN TAX PRINCIPLES What is the goal of government? What is the goal of taxation? Can they be combined?

13. Rival} Non-rival} Excludable Non-Excludable Market Good: Food, clothes, cars, land, timber, fish once captured, farmed fish, regulated pollution Potential market good (Tragedy of the “non- commons”)but inefficient: patented information, Pond, roads (congestible), streetlights Pure Public Good: climate stability, ozone layer, clean air/water/land, Biodiversity, information, habitat, life support functions, etc. Open Access Regime: (misnamed: Tragedy of the commons) Oceanic fisheries, timber etc. from unprotected forests, air pollution, waste absorption capacity Non-rival, congestible Private beaches, private gardens, toll roads, zoos, movies Public beaches, gardens, roads, etc.

14. Taxation + Provision of Public Goods TaxationPublic Goods Green Taxes

15. GREEN TAX PRINCIPLES 1.Internalize external costs 2.Behavioral Approach 3.Revenue Generating

16. EXTERNAL COSTS? ECONOMY LAND USE DEPLETION POLLUTION (Not to mention social costs)

17. PRICES LIE

18. Vermont GPI study

19. GDP AND HAPPINESS

20. 1. Cost Internalization Pigouvian theory (AC Pigou) external costs Polluter pays principle restoration costs Least cost abatement- cost required to abate pollution

22. 2. Behavioral Approach WHATEVER YOU TAX YOU GET LESS OF (WITH ONE EXCEPTION) WHAT DO WE WANT LESS OF? WHAT DO WE WANT MORE OF?

23. TAX ON BUILDINGS - production cost S1S1 D P Q p1 q1 CS PS

24. S1S1 D P Q p1 q1 CS PS tax S2S2 p2 q2 tax Deadweight loss TAX ON BUILDINGS - production cost

25. Inelastic demand-gasoline (few subs.) S1S1 D P Q p1 q1 CS PS

26. Inelastic demand-gasoline S1S1 D P Q p1 q1 CS PS S1S1 tax S2S2 q2 p2

27. Elastic demand-movie (many subs.) S1S1 D P Q p1 q1 CS PS S1S1

28. Elastic demand-movie S1S1 D P Q p1 q1 CS PS S1S1 tax S2S2 p2 q2

29. TAX ON LAND - no production cost D P Q S P1P1 Q1Q1 “Buy land, they ain’t making any more.” -Will Rogers

30. TAX ON LAND - no production cost D P Q S P1P1 tax? Q1Q1 “Buy land, they ain’t making any more.” -Will Rogers P*

31. TAX ON LAND - no production cost D P Q S P1P1 tax? Q1Q1 “Buy land, they ain’t making any more.” -Will Rogers P* Q* tax Ps

32. Modern Economists Right: “Land tax is the least bad tax” ---Milton Friedman Green: “Taxation of value added by labor and capital is certainly legitimate. But it is both more legitimate and less necessary after we have, as much as possible, captured natural resource rents for public revenue.”---Herman Daly Left: “Usurious rent is the cause of worldwide poverty”---Joseph Stiglitz

33. Green tax increase How to spend the money? Dedicated revenues: ~$5 Million Deficit reduction: none in VT Other tax relief: ~$500 Million 3. Revenue Generating

34. GREEN TAX CRITERIA 1.ECONOMIC EFFICIENCY 2.DISTRIBUTIVE EQUITY 3.ENVIRONMENTAL PROTECTION 4.EASE OF ADMINISTRATION