Bradford, Vt. — State Rep. Sarah Copeland Hanzas, D-Bradford, on Monday announced a plan to phase out the Vermont sales tax and replace it with a carbon tax, a proposal she says will help the state reach its energy goals while supporting local retail business.
“It’s time to level the playing field,” she said during a press conference on Main Street in Bradford. “If we want more business in Vermont, it’s time to align our tax code with our values and priorities. Instead of discouraging the kind of commerce we want more of, we should be charging a fee for something we want less of.”
Copeland Hanzas, the former House majority leader, said that within a week she will introduce legislation to remove the sales tax as part of a revenue-neutral scheme that would bring in the carbon tax as a substitute over a period of at least six years.
Joined by state Rep. David Deen, D-Westminster, Copeland Hanzas and a crowd of supporters gathered on the sidewalk across from North of the Falls, a gift shop whose co-owner, Nikki Darling, also spoke in support.
“As a Vermont retailer, I compete with New Hampshire, a state with no sales tax,” Darling said. “Also, with more retail sales happening on the internet, I compete with those sales that often go tax free. Reduction or elimination of the sales tax would help me to keep more of my business sales circulating within the Vermont economy.”
Deen, who chairs the House Committee on Fish, Wildlife and Water Resources, began his remarks on Monday by calling out Republicans who argued — incorrectly, he maintained — that a carbon tax would hurt the state’s economy.
“This manipulated partial truth has left Vermont behind our New England neighbors,” he said, referring to states like Connecticut and Massachusetts that he said are considering similar policies.
Copeland Hanzas, owner of The Local Buzz cafe in Bradford and a science teacher at Valley Vista, is serving her seventh term in the House. She paused occasionally during her remarks, smiling as she waited for the noise from passing motorcycles or tractor-trailers to subside.
“This simple tax reform will encourage businesses and shoppers to come back to Vermont,” she said. “It will spur innovation and create jobs as Vermonters transition to lower-carbon methods of heating and transportation. And it will help us do our part in protecting the Vermont we know and love from the impacts of climate change.”
She said during a question-and-answer session afterward that she had not yet estimated the size of the carbon tax, nor how it may ultimately affect gas prices. That will be a question for the Legislature and its researchers to answer, she said.
Statewide revenues from the sales and use tax are estimated at $396.6 million for the fiscal year ending in 2017, making it Vermont’s third most lucrative behind the personal income tax and the statewide property tax, according to statistics from the Vermont Legislative Joint Fiscal Office.
Eric Davis, professor emeritus of political science at Middlebury College, said a carbon tax could see some political support but probably not enough to pass soon.
“There’s interest in it, that’s certain,” he said. “I think within the next few years, realistically, the chances of it being enacted are pretty low. The governor’s made it pretty clear he doesn’t support a carbon tax.”
Rebecca Kelley, a spokeswoman for Gov. Phil Scott, a Republican who campaigned against a carbon tax last year, issued a statement the same day that said he continues to oppose the idea.
“Vermont is already setting a national example for encouraging more fuel-efficient transportation, green building practices, energy conservation and renewable energy,” the release said, in part. “We can continue to be a leader in environmental stewardship, while balancing this leadership with the urgent need to reverse the crisis of affordability. … Unfortunately, legislators are choosing a far more regressive path with a tax mandate.”
The Vermont Republican Party on Monday afternoon announced that it would oppose any such legislation.
“The fact is a carbon tax will take millions more dollars from Vermont taxpayers, increase the costs of goods and services across the board, cause more businesses to shut their doors and cost us jobs,” said a statement from Executive Director Jeff Bartley. “That is exactly why Governor Phil Scott has repeatedly pledged to veto a carbon tax and Vermont's Republican legislators are prepared to sustain that veto should it become necessary.”
State Rep. Bob Frenier, R-Chelsea, said the proposal would deal a “terrible blow” to the state’s economy and said he doubted removing the sales tax would bolster retail businesses on Vermont’s borders.
“People’s shopping habits are more complicated than taxes,” he said, “and I’m definitely an opponent of a carbon tax.”
Frenier ran for state representative in 2016 on a platform of vehement opposition to a carbon tax, placing “Burma Shave” style signs along local roads that spelled out messages warning of an impending levy on carbon.
Davis, the Middlebury professor emeritus, also noted that similar policies in other states had included an income-based tax rebate, so that any extra transportation costs did not hit low-income residents in a regressive way.
“It’s a consumption tax like the sales tax,” he said, “and lower-income people pay a larger portion of their income on consumption.”
In a later email, Copeland Hanzas said that income-based rebates would be “integral” to her proposal.
She added that the bill would be “short-form” legislation, a “conversation starter” whose details will be filled in later.
Copeland Hanzas said Democratic leadership was not yet on board with the proposal.
“This is independent of House leadership,” she said, “but we certainly hope and expect they will embrace the opportunity to couple tax reform with climate action.”
Rob Wolfe can be reached at firstname.lastname@example.org or at 603-727-3242.