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United States

Narrow miss for carbon tax in US

A controversial proposal for a new tax on carbon based fuel in Minnesota sparked lively debate in the state legislature this spring. But supporters now say the bill will probably not be fully considered by the state government until next year.

In Minnesota, currently the hot-bed of mega wind plans in the US, a controversial proposal for a new tax on carbon based fuel sparked lively debate in the state legislature. But supporters now say the bill will probably not be fully considered by the state government until next year.

The unprecedented Economic Efficiency and Pollution Reduction Act (EEPRA) would be the first tax in America to target carbon based fuels. It is also unusual in that it would reduce the tax burden on jobs, in an attempt to stimulate a clean fuel economy. Specifically, the measure would tax the sale of electricity produced from carbon fuels in Minnesota and also the consumption of fuels such as coal, natural gas, liquid fuels and mixed municipal solid waste.

The resulting "'dirty fuel" revenue would be used to reduce employers' payroll taxes so that jobs located in the state are boosted. It would also provide a refundable income tax credit to individuals.

An additional fund would be created, too, to help implementation of the new tax income under a variety of energy programmes for home "weatherisation," for subsidising the electricity bills of poor people, for public transit and transportation, and for a revolving fund to back businesses to make capital investments for energy efficiency and pollution reduction.

Backers of the bill, sponsored primarily by Rep Willard Munger, stress that the measure would be revenue neutral. The bill, to be phased in over five years until the tax on a ton of carbon is $50, is expected eventually to raise about $1.5 billion yearly, a sizeable proportion of the entire $9 billion in tax revenue collected by the state annually. But any bill that imposes a new tax, even if the bill would reduce taxes, can be highly controversial in the US.

EEPRA failed in a 10-10 vote after debate in front of a state policy committee last month. Backers of the scheme had hoped that more people would turn up to support the controversial measure.

Although an amendment to weaken the bill was introduced, it still managed to tie the votes at 10-10. Rep. Munger decided not to press forward and shelved the matter. It is still alive in the legislature, but in all probability will not be considered until the 1998 session.

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