Washington Voters Consider Carbon Tax – 10/12/16

While the rest of the country is deciding who will become the next president, Washington state will also be voting on the country’s first revenue-neutral carbon tax.

Long held in esteem by economists, a carbon tax is seen by many as the most efficient means of embedding the environmental cost of carbon dioxide emissions into the price consumers and businesses pay for energy. By making emissions more expensive the tax is intended to be a market-based solution that lets businesses decide the best approach to reductions. And because the revenue is used to cut other taxes, the market distortions caused by government intervention are minimized.

And yet, the carbon tax is finding middling support. A poll of support for Initiative 732, as the Washington initiative is known, has found voters roughly split on the issue with resistance coming from both the right and left. Besides the usual opposition to any emissions regulation, some environmentalists believe the measure doesn’t go far enough.

After Democratic Governor Jay Inslee’s proposed a cap-and-trade plan modeled on California’s failed the Democratic-controlled state House or the Republican-controlled Senate, I-732 was supposed to be a compromise to satisfy both sides.

The measure would impose a $15 tax per ton of CO2 in the first year, rising to $25 in the second, and by 3.5% after inflation annually to $100 in current dollars. It would also add 25 cents to the price of a gallon of gasoline.

The measure is projected to add about $8 to the average monthly electric bill. The revenue from the tax would be returned to taxpayers via a cut in the state sales tax, elimination of a business tax, and a tax rebate of up to $1,500 a year to 460,000 low-income workers.

The main reason some environmentalists oppose the measure is its being revenue-neutral. Those people want the revenue I-732 collects to go towards other programs even if it means cutting its appeal and chances of succeeding.

Since more businesses are seeing carbon taxes as the least harmful means of accomplishing emissions reductions, it will be interesting to see how the vote in Washington will go and whether other states will follow its example.

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