State considers fuel tax
by Jack Deming
Jan 10, 2013 | 1160 views | 0 0 comments | 5 5 recommendations | email to a friend | print
VERMONT- In 2008, Gov. Jim Douglas signed a bill that laid out plans to weatherize 80,000 Vermont homes by 2020, in an ongoing effort to make Vermont more energy efficient. In 2012, four years into the plan, the Department of Public Service created the Thermal Efficiency Task Force to explore options for making this plan a reality. For the past seven months, the 60-body group of energy and efficiency representatives from across the state has been exploring the avenues the state must travel in order to make this plan financially feasible as well, and for legislators, the task force’s proposals may pose tough decisions.

As first reported by Peter Hirschfeld in the Barre-Montgomery Times, the task force’s report details a savings of $1.5 billion in heating costs by weatherizing 80,000 homes over the next seven years. Funding the plan will take $260 million in proposed taxpayer dollars, and to collect those funds, a preliminary draft of funding options, released by the task force’s finance and funding subcommittee in November 2012, lists an energy efficiency excise tax as a “high preference.” This could result in an 11-cents-per-gallon tax on heating fuels including fuel oil, propane, kerosene, coal, and natural gas.

According to Matt Cota, task force member and executive director of the Vermont Fuel Dealers Association, a tax on heating oil is simply unimaginable for Vermont residents, and statistics already point to a decades-long trend in more efficient fuel usage statewide. “In the past 40 years, the average Vermont home has reduced consumption from 1,600 gallons a year to 800,” said Cota.

Cota points to the quality of homebuilding, heating equipment, and the price of fuel as reasons why that consumption has dropped. Cota also says the fuel industry is already helping customers become more efficient. “As an industry we’re (fuel companies) no longer in the business to sell more gallons to fewer customers, we’re in the business of selling fewer gallons to more customers to keep costs low as possible. We have to supply an efficient service because if we don’t, consumers move to other sources, and the way to do that is to promote efficiency services. This proposal would call for taxing in order to accomplish what is already being accomplished in the market.”

Another point Cota makes is that Vermont is already a tax heavy state, and that never looks good to a current or prospective business owner. “If you look at what we have for taxes right now, 10 cents of every dollar you spend on energy in Vermont goes to Montpelier, while next door in New Hampshire, they don’t have this laundry list of taxes.”

Cota also said that 5% of households each year have to get new heating equipment and can’t afford the energy efficient choices. If a payment plan were coordinated to allow people to invest in more efficient energy equipment, it would cost significantly less than the $260 million the proposal calls for.

Other proposals for funding the program include a tax credit program for energy efficiency investments as a vehicle for bringing private investment directly into projects or programs that support the state's long-term energy efficiency goals. Another proposition is to access an increase on the 0.5% gross receipts taxes Vermont imposes on the sale of fuel oil, and another option calls for imposing a 6% sales tax on currently untaxed residential and manufacturing fuels.

Susan Spengler, director of Deerfield Valley Community Cares, is directly involved with the distribution of oil to valley residents on fuel assistance, and sees on a daily basis the number of those in need rising. “More and more people are going on these programs because it just isn’t feasible for them to manage on their own anymore,” said Spengler. “I think we need to come up with a way to help people manage on their own, not take over caring for people and charge everyone else for it, because it hasn’t worked in the past. It’s another instance where instead of finding a sensible solution to the problem they want to throw more money at it and who knows where that money is going to end up. We know it’s going to be taken from you and me, but where will it go and when?”

Rep. John Moran says that while he supports finding funding for energy efficiency, it cannot come at the expense of Vermonters trying to make it through the winter. “It’s essential that we look at making houses more efficient, but at the expense of having people freeze today to be warm tomorrow doesn’t make sense to me,” said Moran.

Moran also believes that while any new business owner starting from scratch looks for their most energy efficient options to save money in the long run, increasing taxes on fuel could discourage new businesses from opening in Vermont.

According to Moran, the current gross receipts tax of 0.5% on retail sale of heating oil collected every year amounts to seven or eight million dollars and pays for low-income weatherization, along with money from the federal government among other sources. Moran says this money needs to be spent more efficiently.

The nature of the tax would also irk Moran as it would be assessed on every Vermonter, while the benefits may only affect a portion of those who were forced to contribute. “This would be tax revenue of $30 million a year that can be assessed on anyone regardless of their income. You could have situations where people are paying, but the money is being used to pay for solar panels for people of higher income who apply for them. You could have some of the richest people in Chittenden County having their solar panels paid for by the poorest residents of Bennington County, now how is that fair?”

Cota believes the proposition of raising a tax on heating oil is more a witch-hunt then a solution. “There is an influential constituency in Montpelier who believe that use of petroleum-based fuels is a sin much like cigarettes or alcohol, and the only way to reduce consumption in their minds is to tax the heck out of it, and that is a growing political philosophy in Vermont. Detractors of heating oil know petroleum products heat 85% of Vermont homes, but because they want them used less, they want to artificially raise that price. So it doesn’t matter whether it’s $260 million or not, in the end, it’s just making it more expensive to use a product they don’t like, and from their perspective that’s a good thing.”

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