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Shumlin’s desperate search for taxes

By John McClaughry

Posted May 3, 2007

Shabby, desperate attempts to find something new to tax are now playing themselves out in Montpelier. The principal actor is the Senate Pres. Pro Tem Sen. Peter Shumlin, D-Windham.

As every legislator who campaigned last fall well knows, the number one issue afflicting Vermonters all across the state is the rising cost of public education. Those rising costs translate into rising property tax rates. The people demanded action.

But Shumlin opened this year’s Legislature, not with a focused effort to deal with education costs, but with two weeks of “seminars” on the menace of global warming. Once everyone was suitably indoctrinated in the urgent need for action to save the planet from Al Gore’s heat death, Shumlin planned to push through the sweeping environmental program of the Vermont Public Interest Research Group (VPIRG).

There were several key ingredients in the VPIRG anti-heat death program. One was to get people out of big, gas-consuming vehicles. That was the rationale for a $150 surtax on the purchase of minivans, SUVs, and pickup trucks. The revenues from the tax would be used to subsidize the purchase of upscale hybrids for people who can afford $35,000 cars, plus little teeny-weeny cars for everybody else. That scheme collapsed in mid-April when even enviro Democrats were too nervous to do it.

Another key ingredient was creating a permanent “efficiency utility” to explain to businesses and homeowners how to get by using less heating fuels. This “thermal efficiency” program was to be paid for with a new tax on heating oil, propane, and natural gas. That scheme — deceitfully labeled a “heating fuel savings charge” — crashed when people who heat their homes and businesses found about it.

By late April, the senator from VPIRG was getting desperate to find new tax dollars to fund his environmental initiatives. So he turned to a favorite shakedown target that, unlike car owners and heating fuel users, doesn’t have a vote: Vermont Yankee. Shumlin also represents Windham County. Hitting Vermont Yankee with a new tax is popular with that county’s anti-nuclear activists who rightly view him as their favorite politician.

Recall that in November 2003, in return for Department of Public Service’s (DPS) support for its application to the Nuclear Regulatory Commission for a reactor power uprate, Entergy, the owner of Vermont Yankee, agreed to pay the state $7.8 million to clean up algae in Lake Champlain, 180 miles away, plus $2.1 million to pay for more low-income home heating assistance.

The lake cleanup plan fund was nixed by the Public Service Board, but in granting uprate approval, Entergy was ordered to put $4.5 million aside to protect ratepayers from sticker shock if the plant shut down, and then make quarterly payments of $625,000 to the state.

Two years after making that deal, Entergy sought regulatory permission to store spent fuel rods in concrete casks, instead of a cooling pool. “Aha!” cried the Legislature. “Entergy needs another approval. Let’s make it pay us $4 million a year from now until 2012, and we’ll decline to object to how the plant stores its used rods (on its own property, at its own expense).”

So, to avoid a long and uncertain political and legal battle, Entergy, the state’s lowest cost, most reliable energy producer, agreed to pay the state’s new Clean Energy Development Fund as much as $28 million over the next seven years. The state will use the money to subsidize VPIRG’s favorite renewable energy projects, chief among which are legions of already-subsidized 420-foot wind turbine towers marching along Vermont’s mountain ridges.

Last year, the Legislature earmarked $1.3 million in the fund to be used for a variety of projects: $500,000 to support small-scale wind and solar; $485,000 to support CowPower projects; $100,000 went to the Agriculture Agency for renewable energy development; $100,000 went to an assisted living project in Windham County; $65,000 went to DPS to defray administrative expenses; $50,000 was set aside for the upcoming public participation process; and $50,000 was used to help the University of Vermont and Middlebury College examine the construction of combined heat and power projects.

Now it’s 2007. The senator from VPIRG, observing that he was not a party to the 2005 agreement, proposes to tax the spent fuel rods that Vermont Yankee already agreed to pay $28 million for permission to store. He also proposes to impose a special tax on any revenues the company might make by selling on the spot market the 20 percent of its power not already under a long-term contract. This dishonorable stunt would shatter the 2005 agreement that Entergy, acting in good faith, thought it had sealed with its $28 million.

But on April 26 that scheme collapsed from legislative opposition (notably from the more conscientious House Speaker Gaye Symington, D-Jericho, who had been a party to the earlier agreement). So the senator from VPIRG proposed another even more far-fetched new tax: a 35 percent tax on any “unanticipated revenues” that only one particular business — Vermont Yankee — might earn from selling its product. Even liberal senators gagged on this fantastic proposal, which if adopted would forever poison Vermont’s business climate.

Both the 2003 and 2005 deals between the state and Entergy are examples of government extortion. For enough protection money, the state agreed not to strangle Entergy’s plans to produce more cheap, dependable power and improve the management of its waste. This is just what any Mafia racketeer would do if he had the power.

That’s bad enough. But the senator from VPIRG now wants to break the latest deal, and hammer Entergy again. Even the Mafia wouldn’t do that.

John McClaughry is the president of the Ethan Allen Institute, www.ethanallen.org.