As April 15th nears and millions of Americans rush to get their taxes filed, many people are not aware of how climate change and catastrophic weather events are affecting their taxes.
Wildfires, floods, hurricanes, drought…all of these disasters are taking a toll on Americans and their wallets. While many people view climate change in terms of its future effects on the economy and environment, Michael Zammit Cutajar, former Executive Secretary of the UN’s Convention on Climate Change, says “Climate change is not just a distant threat but a present danger—its economic impact is already with us.”
In February, the U.S. Government Accountability Office (GAO) warned that “Climate change is a complex, crosscutting issue that poses risks to many environmental and economic systems—including agriculture, infrastructure, ecosystems, and human health—and presents a significant financial risk to the federal government. Among other impacts, climate change could threaten coastal areas with rising sea levels, alter agricultural productivity, and increase the intensity and frequency of severe weather events. As observed by the United States Global Change Research Program (USGCRP), the impacts and costliness of weather disasters—resulting from floods, drought, and other events such as tropical cyclones—will increase in significance as what are considered ‘rare’ events become more common and intense due to climate change…These impacts will result in increased fiscal exposure for the federal government.”
And anything that causes the government “increased fiscal exposure” is usually passed on to taxpayers. Take the National Flood Insurance Program (NFIP) for example. The NFIP was designed to be self-supporting, but the GAO reports that since 2003, repetitive catastrophic losses have cost taxpayers more than $200 million dollars per year.
According to Mindy Lubber, President of Ceres, a nonprofit organization preparing business leadership on climate change, “The National Flood Insurance Program (NFIP) is staggering under massive losses after Superstorm Sandy…Although the NFIP collects about $3.5 billion a year in premiums, the amount of claims the agency has paid out has exceeded the amount collected in four of the past eight years, leading to increased borrowing by the Federal government (in other words, taxpayers) to fill the gap. Last year’s losses in Sandy’s wake are expected to approach $8 billion. That’s $25 for every American.”
And those figures do not take into account the $50.5 billion dollars in disaster relief Congress approved this January for Sandy victims.
“With sea levels rising and storm surges reaching farther inland because of climate change, risks to coastal communities and costs to taxpayers will continue to rise,” says Lubber.
While the NFIP is drowning in claims, last year’s third-worst wildfire season in U.S. history has left the West scorched and burned a hole in the budgets of those states affected. More than nine million acres burned, and the U.S. Forest Service “overspent its available fire suppression budget by $400 million, as it has almost every year for the last 20 years,” says Lubber.
Climate change models predict “that in a warming world, the West and Southwest will become drier and hotter—conditions ripe for wildfires.” With increasing numbers of wildfires as well as increasing costs to suppress them, taxpayers will get burned from both sides.
The extended drought across the country is also costing taxpayers. The Federal Crop Insurance Program (FCIP), subsidized by taxpayers, was created during the Dust Bowl to protect farmers against crop losses. According to Ceres, federal crop insurance payments have increased dramatically in the past decade from $4.2 billion to $16 billion in 2012, costing every American an additional $51 per year.
“And these costs are likely to continue — the latest numbers from the U.S. Drought Monitor show nearly 67 percent of the contiguous U.S. is now experiencing some level of drought,” says Lubber.
There are other risks to taxpayers from extreme weather events as well. As Lubber points out, “State governments are increasingly liable for the cost of damages as private insurers pull out of at-risk locations, leaving state taxpayers subsidizing insurance loss claims for homes and businesses.”
Extreme weather events pose threats to our nation’s well-being as well as being destabilizing fiscal risks. Neither the NFIP nor FCIP are prepared to deal with climate change. Whether recent extreme weather events are the direct result of climate change or random acts of nature doesn’t matter in the end, because we all eventually suffer the economic consequences.
Link: http://www.gcnlive.com/wp/2013/04/12/climate-change%e2%80%99s-effects-on-taxes/
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