(HOST) Commentator John McClaughry has some advice for legislators, as they return to Montpelier for a special veto-override session.
(McCLAUGHRY) On Wednesday there’ll be a showdown between Vermont’s legislature and Governor Jim Douglas. The legislators will try to override the Governor’s veto of their energy bill.
The centerpiece of this bill is creation of a new thermal efficiency utility to combat the menace of global warming by persuading Vermonters to emit less carbon dioxide.
To pay for this supposed necessity – $25 million over five years – the legislature tripled the generation tax on the state’s largest producer of cheap, reliable, carbon-free electricity, Entergy Vermont Yankee. The argument for this tripled tax is that the legislature gave Vermont Yankee a sweetheart tax deal in 2003. Here the going gets very slippery.
Until 2004 Vermont Yankee paid a state property tax based on the net book value of the plant. In 2001 Gov. Dean suggested to the plant’s then-owners that the ever less productive tax on decreasing net book value be replaced with a tax on power generated. Incoming Gov. Douglas agreed, and the 2003 legislature replaced the property tax with the production tax.
Senator Peter Shumlin, the leading advocate for the vetoed bill, claims that “last year Entergy paid $500,000 less in property taxes than it did in 2003,” and other taxpayers are thus being forced to make up the difference. But the 2003 law ended Entergy’s liability for paying state property taxes. The Joint Fiscal Office calculates that under the new generation tax Entergy will pay $4.70 million this year, compared to the $4.45 million that it actually paid in 2003.
In addition, Entergy will pay the state an estimated $39.7 million from 2005 to 2012 to buy the state’s agreement to increase its power output and store used fuel rods onsite in dry casks. Strictly speaking these payments are not taxes – extortion payments would be closer to the truth – but they have dramatically increased Entergy’s annual payments to the state. The picture of Entergy as a tax sweetheart is, to use a favorite word these days, unsustainable.
Gov. Douglas vetoed the bill as what he rightly viewed as a cynical effort to raise new taxes to fund at best only marginally useful government programs. He has counter-offered with $2.5 million over four years, to subsidize the interest rates on $20 million in energy conservation loans made by banks to families with incomes too high to qualify for the present taxpayer-financed home weatherization program. Where this money will come from is something of a mystery.
Here’s an even better idea that would give both sides a victory: the legislature should uphold the governor’s veto of the Entergy tax, scrap the governor’s subsidized loan proposal, and go home. That would be a good day’s work on behalf of taxpayers and common sense.
John McClaughry is president of the Ethan Allan Institute, a Vermont policy, research and education organization. Tomorrow commentator Bill Shutkin has another perspective on the special session.