Happy Earth Day! I hope we treat everyday as Earth Day. Before getting to taxes, I have to note anytime I mention Earth Day that is was created in 1970 by Gaylord Nelson who was later a senator and governor from Wisconsin. But, he is an alum of San Jose State University!
Our federal income tax is an odd and unfortunate mix of incentives for oil and gas (such as benefits for intangible drilling costs) and incentives for clean or alternative energy such as a vehicle credit for hybrid and electric cars among other credits.
Thus, our income tax doesn’t reflect out country’s economic, societal and environmental goals. Or, more likely, we don’t know what our goals are for the environment which is not good for our Earth.
If our federal tax system reflected concern for protecting the Earth, we’d see such measures as:
1. Phaseout of incentives for fossil fuels.
2. An increase in the gasoline excise tax which has remained at 18.4 cents per gallon since 1993 and is not even adjusted for inflation. And every year we have more electric cars that don’t pay this tax even though they use the roads. We are way past the time to start implementation of a vehicle miles travelled (VMT) tax. Oregon, California and a few other states have already investigated this. In tax reform discussions leading up to the TCJA, a Senate Finance Committee working group on infrastructure and taxes suggested a VMT and noted that the lead time needed was 10 years! We’re already wasting time not working on this suggestion from 2015.
3. Remove any tax incentives that might encourage building in fragile areas such as coastal areas and the mountains. Years ago, the Friends of the Earth suggested getting rid of the mortgage interest deduction for a second home as most such homes were vacation homes in the mountains or beach area. That is just one of many reasons to get rid of the mortgage interest deduction on second homes!
4. Review incentives for alternative energy to be sure they are meeting their goals. If not, repeal them or reform them.
5. Form a well-rounded and informed task force to work on designing a carbon tax + possibly a tax or other approach to reduce production of other greenhouse gases. These taxes don’t have to be at a high rate, but I think they are needed to help everyone who generates greenhouse gases (all of us!) to be aware that we do. And we need to look at more than a carbon tax because fossil fuels are just one source of greenhouse gases.
What do you think? What are your ideas?