by Christina Tang and Mariah Gomes, Montpelier High School Students-
We are two students from Montpelier High School studying the costs and benefits of a carbon tax in our economics class. We believe a carbon tax should be implemented into the lives of Vermonters.
According to the National Center for Children in Poverty, “In Vermont, there are 71,050 families, with 125,164 children. Among these children, 34 percent live in families that are low-income.” The lower and middle classes are already suffering enough. What other hardships would families that are barely making ends meet currently endure if a carbon tax were to be implemented? Our research focused strongly on how this tax would affect lower-income families in Vermont. Although the regressive carbon tax would disproportionately affect lower-income families in the short-run, it may also have a positive net impact on these lower income families.
The carbon tax is designed to transform energy investments and reshape consumption in order to reduce carbon emissions. The carbon tax will ultimately be a tax on fossil fuels such as coal, oil and natural gas, and biofuels. The goal for this tax is to make people think twice about their resources and reshape their everyday activities. The tax will make people think more openly about carpooling, buying locally, and alternative ways to heat homes during winter.
The carbon tax that will be implemented in Vermont will be a regressive tax. A regressive tax means that lower-income families are affected more harshly than wealthier families. In the short run, a higher percentage of the tax will be placed on lower-income families. The reason why lower-income families would be impacted more by this tax is because studies show that lower-income families spend more of their income on energy than higher-income families. With just this information, it will be incredibly difficult to persuade lower-income families to be in favor of a carbon tax based on what they see in the short-run. It is important to inform the public about the benefits this tax can have in the long run as well.
There are many advantages lower-income families receive with this tax. To ensure that lower-income households suffer no harm, they will receive benefits, such as refundable income tax credits. According to H.395, of the 36 percent of the carbon tax revenue that would be allocated to the refundable income tax credits, three-fifths would go to the poorest 40 percent of families in Vermont and no credit would be given to the richest 20 percent of Vermonters. Ten percent of the funding would go toward state energy programs. These programs will consist of installation of cold climate heat pumps in homes using heating oil, electrification and hybridization of cars, incentives for solar, heating and process fuel efficiency, and weatherization of homes. The majority of the tax money generated from this carbon tax will be allocated to benefit lower-income families. Thus, hypothetically, the net gain in the long-run will overshadow the loss in the short-run for lower-income families.
Although it is hard to look past the additional cost that a carbon tax would bring to lower-income families, it is necessary to look not only at the short run, but also at the long run value of this tax. What people don’t realize is that this tax is designed to transform energy investments, reshape consumption, reduce carbon emissions, and potentially save the world.