Bacon's Rebellion

Democracy Thrives in Sunlight

Tax Breaks for Green Buildings?

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by

James A. Bacon
in ,

Here’s a sleeper: The General Assembly passed a law in the last session that would enable localities to tax energy-efficient buildings and homes at a lower rate than other real estate. Now a group in Charlottesville is urging the city to pass an ordinance instituting the dual tax rate.

Writes Seth Rosen with the Daily Progress:

To qualify for the lower tax rate bracket, buildings would have to be 30 percent more energy-efficient than the standards prescribed in the state’s building code. Any home or business that is Energy Star or Earthcraft certified – two of the most common energy-saving classifications – likely would meet the criterion, officials said.

I’m conflicted. I totally believe that Virginians need to more toward more energy-efficient buildings and patterns of development. Tax incentives, which work through market mechanisms, are preferable to government mandates.

But I’m worried about the legal precedent of establishing two classes of property for taxation purposes. Could this open the door for all manner of preferential tax treatment? The state income tax code is already swiss cheese, riddled with exemptions that, according to a Warner administration-era study, shifted some $1 billion a year in tax burden from privileged categories of taxpayers to the rest of us. Do we really want to see the same process replicated with the personal property tax?

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6 responses to “Tax Breaks for Green Buildings?”

  1. James Atticus Bowden Avatar
    James Atticus Bowden

    The precedence for taxation as an extension of politics was set in colonial times.

    It’s great to offer carrots as well as sticks. Great to offer tax breaks for reducing environmental impact.

    I call the land, air, and water of Virginia – finitudes. The amount is finite. Private property rights rule that ownership is protected, but how one uses those finitudes impacts on all Virginians – and future generations. It’s reasonable to tax appropriately.

  2. Jim Patrick Avatar
    Jim Patrick

    The idea is appealing but I’d have to see numbers —lots of numbers— before I supported this.

    To realize a +30% “efficiency” requires about twice the insulation —at twice the cost— of a code-compliant building. High-e glazing for windows and doors is disproportionately more expensive than standard double-glazed.

    [Aside from the fact that “energy efficiency” is not measured, but is deemed to exist by certain, listed building methods and materials. Buildings that exceed the code in reality often don’t qualify due to unlisted construction or materials. Bureaucracy as usual.]

    In addition, what is the energy cost of +30% “efficiency”? Insulation is an energy-intensive material to manufacture. High efficiency appliances require energy to produce, cost more, and rarely have a real ‘payback’ in total terms.

    Compact fluorescent lights use less current, but require far more energy to produce and carry their own environmental costs. They may be produced overseas, but the energy is still consumed and places a demand on world energy supply and price.

    For any government, required revenue is a fixed amount. A tax break to ‘conservers’ means that other citizens will have to pay a higher rate to pick up the slack.

    Despite the best intentions of the Citizen Committee on Environmental Sustainability, I see potential to truly hurt citizens who can afford it least —pensioners living in their own older homes, lower-income folks in apartments, etc. They will face increased tax (or rent) to pay for the government revenue shortfall.

    In return, the policy favors new construction. Reuse —another word for continued use— is the first and foremost efficiency. No, there’s too much chance of unplanned harmful effects for me to endorse the policy.

  3. Larry Gross Avatar
    Larry Gross

    ditto. Bad idea.

    Let the market reward those who choose to save money by building more efficiently.

    But I still grump about issues like the compact Flourescents in terms of unsubstantiated claims on both sides.

    Europe is now doing “cradle to grave” analysis of products that are obstensibly “Green”.

    We need to do the same.

    The problem we have is that we all want to be “Green” but each of us has our own idea of what “Green” is.

    Some of us use CFs. Some of us recycle plastic bags. Some of us buy gas efficient cars –

    and ALL of us tend to think that what the other guys are doing in terms of “Green” is not as good as what we are doing.

    And the truth is – that most of us are not doing much at all – because:

    1. – Many of us simply don’t know

    2. – Many really don’t want to know either. They prefer to do “their share” without really knowing if it is truly effective.

    The truth is – that when you and I turn on our light switch (unless we are Waldo with his GREEN power), we have chosen to do what Waldo chose not to do – generate mercury and/or nuke pollution.

    When we drive solo SUVs to/from work everyday at rush hour – it doesn’t matter how many plastic bags we recycle because in terms of reductions those bags are something like 1/10 of 1% whereas carpooling might actually 10-20%.

    But this is what I mean when I say we need to know and that we need to want to know.

  4. Ray Hyde Avatar
    Ray Hyde

    I’m pleased to see Jim Patrick making comments that might have been my own. We need to consider the embodied energy in favored “improvements”, and to what extent the improvements are motivated by wealth transfer. I agree that re-use is the best use.

    This is a bad idea, and I’m not sure I see it as all that different from the proposed Richmond drainage tax.

  5. Larry Gross Avatar
    Larry Gross

    The difference is …

    that what you do with your own property is your business as long as it does not cause harm to others.

    The drainage tax rationale – (I think) is basically to collect the money from the property owner that should have been spent to prevent runoff from his property – and to use that money to collect and store the runoff so that it does harm other’s properties nor harm the environment (which is owned by the public and requires taxes on the public to clean it up).

    That is why I suggested than an alternate approach would be to let the property owner install their own facilities – such as LID – to prevent the runoff from occuring to start with.

    The basic idea is for the property owner to NOT have excess/harmful pollution leaving their property in the first place.

    In a nutshell, a persons property rights – includes NOT having their property harmed by activities done by other folks on their properties.

    Wrong?

  6. Anonymous Avatar
    Anonymous

    It’s a great idea and we’re going to push it through in Charlottesville. The guy who said doubling the insulation costs double needs to check his math. Most of the cost of insulating a home is labor. Same labor charge for double the blown-in insulation. I just did it on my home. Almost the same thing with liquid mastic on ductwork. The payback is instant and payback period is rapid. This is not stuff that is debated anymore.

    Whether the tax break is on income or property tax matters little, it’s an investment in our national security. If you can’t see that, you’re not paying attention.

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