It is a common adage that states are the laboratories of democracy, and as such state policy can drive debate at the federal level. The trouble with this is state policy is not always positive, and can have damaging impacts at the state and federal level. This is no clearer than with the idea of a carbon tax, which lawmakers in the state of Vermont may soon consider. While a carbon tax would harm Vermont residents, businesses, and overall competitiveness, more concerning is such a tax could influence the federal carbon tax debate in the coming years, for better or worse.
Vermont is no stranger to questionable policy, as evidenced by the state’s recent GMO-labeling law, which lasted less than a month before being voided by a federal statute. Yet efforts to enact a carbon tax in the state take bad policy to a new a level.
The carbon tax in Vermont is being pushed by a coalition of far-left special interest groups that have thrown their support behind H. 412, proposed by State Representative David Deen (D-Windham). Deen’s bill would put in place a $10 tax per metric ton of emissions. The tax would increase $10 annually, reaching $100 per ton in 2027, and amount to a total tax of $500 million annually once fully implemented.
Residents in the state of Vermont that rely on affordable energy to keep their homes warm, farms growing, and cars running, will face higher costs across the board as a result of a carbon tax. The proposed tax would amount to a whopping increase of 89 cents per gallon of gasoline and increase the costs of heating oil and diesel fuel by $1.02. Similarly, natural gas and propane users could see projected costs increases of around 30 percent.
A carbon tax would also impact the state economy and overall competitiveness. Investment in the state would likely be impacted as businesses look to more favorable tax climates in surrounding states. According to the non-partisan Tax Foundation’s 2016 State Business Tax Climate Index, Vermont ranked 46th overall as having one of the worst tax systems in the country for businesses. Why anyone in Vermont would want to add a tax as far-reaching as one on carbon to an already dismal tax system defies basic logic.
It is also perplexing why a carbon tax is even being pushed in the state. According to the Department of Energy, Vermont has the lowest consumption of energy and lowest carbon dioxide emissions of any U.S. state. Clearly this is an ideologically driven regulation in search of a problem.
Furthermore, voters in Vermont don’t want a carbon tax. In 2015, the Vermont based Ethan Allen Institute ran a statewide survey, reaching out to Vermont voters regarding support or opposition to a carbon tax. Out of the 1,546 people that responded, an overwhelming 90% opposed it.
While such a tax would be disastrous for the state, the implications of Vermont passing a carbon tax as it relates to federal policy are even worse. Currently a handful of other states, such as Washington, Oregon, and Rhode Island, are facing carbon tax proposals. If a Vermont carbon tax goes forward, it could set the stage for other states to follow suit, eventually influencing the federal carbon tax debate in the worst way.
For the state of Vermont, a carbon tax means higher costs for energy and consumer goods, and a reduction in the state’s competitiveness. For the nation as a whole, passage of a carbon tax in Vermont could set an even more dangerous precedent. As such, efforts to pass a carbon tax in Vermont must be stopped before such harmful policy spreads, infecting the whole of the body politic.
Bradley Wyatt is a Federal Affairs Associate at Americans for Tax Reform, focusing on energy and environmental policy. Bradley is a native of Virginia and is currently obtaining his degree in Public Policy and Administration from James Madison University.