Carbon Tax Initiative in Washington State

It is rare these days for an environmental proposal to get support from both sides of the political spectrum.

And it is even rarer that such wide support deals with a new tax.

But such a proposal that may soon go to the voters of Washington State:

a carbon tax initiative.  

Let me tell you about this idea and why I support it.

A Washington State group, Carbon Washington, has drafted and is now getting signatures for an initiative (I-732)  to the legislature, so it will go to the legislature in Jan 2016 and then (if they don’t pass it) onto the ballot in Nov 2016.  An initiative to put a revenue-neutral tax of fossil fuels.

The group starts with the principle that because of the threat of global warming, the entire planet must reduce its use of CO2-emitting fuels.   Certainly true.  We must find a way to stop the rapid increase of CO2 in the atmosphere before the more severe effects become apparent later in the century.

But what is the most effective way to reduce carbon emissions?    There is a compelling argument that the best approach is to motivate the free-market system.   And how can you do that?    By taxing what you don't want: carbon emissions.

Initiative 732 would do so by putting a tax on carbon use, roughly $ 25 a ton of carbon.   But it does so in a revenue neutral way, refunding the tax revenues gathering by the carbon tax by REDUCING other taxes for an equal amount.  Thus, the overall economic impacts should be small.

For example, the state sales tax would be reduced by 1% in Washington State.

To ensure that local manufacturers are not put at a competitive disadvantage, the Business and Occupation tax (B & O tax) for manufacturers would be eliminated.

And to protect lower income folks, who spend a higher percentage of their income on fuel and heat than more well-to-do individuals, some of the carbon tax would go into a Working Families Rebate.

What comes in and out balance, making the initiative revenue neutral.

The idea of the carbon tax is not new.  In fact,  British Columbia has such a carbon tax, which seems to be working.  The same is true for Ireland.

A free market approach, such as the carbon tax, has proven to be appealing to free market and conservative think tanks, such as the Washington Policy Center (here and here are their analyses). And it has been supported on newpapeer editorial pages, such as in the Olympian.

There are other approaches to use financial incentives like cap and trade, an approach pushed unsuccessfully by Governor Inslee during the past session.  Cap and trade is a far more complex and unreliable method, setting a limit on carbon emissions and having major emitters bid on the right to do so.  Cap and trade has generally not been very successful where it has been attempted, as in Europe.

Now, there are folks that argue that since Washington State is such a small part of the global CO2 problem, we should not worry about it.  But everyone is a small part of the problem, which can only be solved by everyone doing their bit.   And we are a significant part of the problem:  what is our biggest industry, one that produces an fuel-intensive transportation system?    Aircraft from Boeing. And now we are considering building huge export terminals for coal.

We have as much responsibility as anyone to reduce our carbon footprint.  And considering our position as a leading world technological center, we have the responsibility to lead.

http://www.nytimes.com/2015/06/07/opinion/the-case-for-a-carbon-tax.html

The carbon tax makes particular sense now because auto/track gas prices are relatively low, as is natural gas used to heat our homes. Folks will not feel the impact in the same way as when gas prices are above four dollars.

The initiative is well written and clear.  If I had drafted it, I would have made two adjustments:

1. Have the carbon tax fade out when gas prices get about 5 dollars a gallon
2. Use, say, 25% of the tax revenues to deal with regional traffic, perhaps by adding a fleet of commuter buses for travel into and out of our major cities (like Seattle, Tacoma, and Spokane).

But the current version is fine.

The bottom line is that I support the Carbon Tax initiative and I hope you will as well.  CarbonWashington need signatures for the initiative and financial support.