This February 1997 report by David Morris, Alyson Schiller, and John Bailey examines the impact of the proposed Economic Efficiency and Pollution Reduction Act (EEPRA). The bill’s introduction in the 1996 Minnesota State Legislature prompted a discussion about its impact on Minnesota businesses. This report addresses this question. It does so by assessing the net impact of several types of tax shifts on 23 Minnesota businesses, ranging from neighborhood coffee shops to equipment manufacturers and farmers and paper mills.
EEPRA imposes a tax on all fossil fuels and nuclear energy and reduces taxes on property and work. The tax in the form of a $50 fee per ton of carbon burned would raise $1.5 billion a year. Of that amount, approximately $870 million would come from the business sector. The money would be used to reduce existing taxes. Thus EEPRA is revenue neutral. There is no net tax increase on average. Moreover, EEPRA is sectoral neutral. The additional taxes raised from the household sector are returned to the household sector and the additional taxes raised from the business sector are returned to the business sector.
The tax is revenue and sectoral neutral but it has different impacts depending on the kind of business involved. As one would expect, labor or property tax intensive firms would benefit most from the tax and energy intensive firms with small labor forces would benefit least.
