Offsets for a Green Tax Shift

1
Offsets for a Green Tax Shift
2
Additional revenue from Green Taxes where
should it go?

• Offset individual income tax?
• Offset Corporate/business income tax?
• Offset Telecommunications tax?
• Other Recommendations?
• Offset Fed payroll tax?

3
Individual Income Tax?

• Over 400 M, 40 Tax Dept receipts over last
  several years
• Can eliminate tax on large percentage of filers
  for relatively small expenditure

4
Individual Income ExamplesTo eliminate income
tax on x , who earnwould cost

• 52 of filers lt30K Income 19.6 M
• 71 of filers lt50K Income 72.2 M
• 100 of filers all income brackets
• 380M - 420M, depending on year

5
Drawbacks of Income tax Offset

• State Income tax is progressive enough that
  lowest income filers have little or no liability.
• Offsetting Income tax would not help compensate
  for higher fuel costs.

6
Corporate/Business Income Tax?

• Could potentially be eliminated
• Left alone for now
• Businesses derive benefits from offsetting FICA
• Law of unintended consequences
• Current work being done to change corporate
  taxation, requiring Unitary Combined reporting to
  crack down on income-shifting

7
Sales and Use Tax?

• Considered green, as it taxes throughput and
  waste.
• Left alone for now.
• Must be reviewed and revised to tax
  environmentally damaging products more heavily
  than benign ones.
• Review exemptions, leave only those on
  necessities used by all people.

8
Federal Payroll Taxes FICA Federal Insurance
Contributions Act

• Part 1 Social Security/OASDI
• (Old Age, Survivors, Disability Insurance)
• 12.4 of all wages paid up to 87,900. Ceiling
  increases to 90,000 in 2005.
• Half paid by employer, half by employee, unless
  self employed.

9
FICA Taxes, contd

• Part 2 Medicare
• 2.9 on all wages no ceiling
• Half paid by employer, half by employee, unless
  self employed.
• Total of 15.3 of wages paid to FICA
• 7.65 each by employer and employee
• (over 90 of Vermonters are unaffected by ceiling)

10
Why FICA?

• Better direct offset than income taxes.
• Easy to measure due to federal reporting
  requirements.
• Can reimburse based on wages and taxes paid,
  starting at the bottom of the income scale.
• Better for business 7.5 tax reduction

11
Examples
Income employee VT income tax FICA employee FICA employer Self-employed
10-15K 0 956 956 1912
15-20K 79 1340 1340 2680
25-30K 633 2486 2486 4972
12
Economic Benefits-FICA offset

• Returns income to those most likely to spend it,
  boosting local economy.
• Incentive for employment.
• Aids businesses as well as workers.
• If its favorable to employ or be employed here,
  thats a Business-Friendly environment for
  Vermont!

13
Shifts tax from a good to a bad!

• Revenue collected based on carbon emissions
  and/or water usage, which individuals and
  businesses can work to control. There is a
  financial incentive to make responsible
  decisions.
• Damaging impacts of payroll taxes are offset,
  boosting Vermont economy.

14
Design/Administration
2.6B revenue
15
Design/Administration
2.6B revenue
16
Design/Administration
2.6B revenue
17
100 Green TAX shift-2004
Carbon 300/ton
Land 9.6
Waste 2/bag
Water 1c/gal gt100gals
Chem product fee 300 on pesticides
2.6B revenue
18
Conclusions

• Can shift to tax resources and waste without
  hurting and perhaps helping the economy.
• Can eventually simplify taxation and revenue
  generation enormously by shifting to a few broad
  based green taxes.
• Like anything else, all thats missing is the
  political will.