NO on Initiative 732
NO on Initiative 732

Edi­tor’s Note: The team at NPI is pleased to wel­come Robin Barnes to the Cas­ca­dia Advo­cate. Robin holds a Ph.D. in Physics from Rut­gers, The State Uni­ver­si­ty of New Jer­sey. She cur­rent­ly works on inter­na­tion­al non-prof­it projects that pro­mote gen­der equi­ty, human devel­op­ment, and envi­ron­men­tal jus­tice. In this spe­cial guest post, she explains why vot­ers should reject Car­bon­WA’s I‑732.

The warm­ing effects of Earth­’s atmos­phere were first dis­cov­ered in the year 1820 by Joseph Fouri­er. It was well under­stood and quan­ti­fied by Svante Arrhe­nious at the turn of the twen­ti­eth cen­tu­ry. It is sci­en­tif­i­cal­ly well estab­lished that our plan­et has a fever, and there is no dis­pute about its cause. Our world’s cli­mate has been dam­aged by burn­ing fos­sil fuels on a mas­sive scale, which has sig­nif­i­cant­ly increased the amount of pol­lu­tion in our atmos­phere. To address this envi­ron­men­tal cri­sis, we need to change our behav­ior — and we know this.

While the sci­ence is indis­putable, human­i­ty can’t seem to agree on solu­tions to pro­tect our­selves and the Earth, the only inhab­it­able plan­et we’ve got.

Pro­po­nents of Ini­tia­tive 732, which will appear on Wash­ing­ton State’s Novem­ber bal­lot, say Wash­ing­ton’s response to the cri­sis should be to start levy­ing a car­bon tax on emis­sions of air pol­lu­tants like car­bon diox­ide and methane — and use the rev­enue from that tax to low­er oth­er regres­sive taxes.

But this approach is fatal­ly flawed. Here’s why.

Let’s begin by estab­lish­ing the fol­low­ing root prin­ci­ple: A car­bon tax, by itself, does not curb con­sump­tion of fos­sil fuels, the main dri­ver of air pol­lu­tion. Peo­ple chang­ing their behav­ior to avoid pay­ing the tax is what low­ers emis­sions. A car­bon tax can reduce emis­sions if and only if it will tax peo­ple who are able to mit­i­gate their con­sump­tion of fos­sil fuels, there­by avoid­ing the tax.

If the pur­pose of a car­bon tax is to low­er emis­sions, impos­ing it on peo­ple or enti­ties who lack the means to aggres­sive­ly reduce their emis­sions is sim­ply inef­fec­tive. Impos­ing this tax on peo­ple who are not in an eco­nom­ic posi­tion to low­er their car­bon con­sump­tion is mis­di­rect­ed and unjust.

Corol­lary: If a car­bon tax actu­al­ly low­ers emis­sions, it will low­er its own rev­enue gen­er­at­ing pow­er as well. A car­bon tax that effec­tive­ly low­ers emis­sions will min­i­mize or elim­i­nate itself by design – if emis­sions fall, so does rev­enue. As peo­ple avoid pay­ing the tax, the rev­enue from the car­bon tax dimin­ish­es. That is, unless the tax is set to be rev­enue neu­tral. If it suc­ceeds in low­er­ing car­bon emis­sions, we will have to con­tin­u­ous­ly raise the car­bon tax rate to make up for rev­enue loss.

What does I‑732 do?

  • It sig­nif­i­cant­ly low­ers the Busi­ness and Occu­pa­tion (B&O) Tax, and replaces it with a car­bon tax of $25 per ton min­i­mum, increas­ing up to $100 per ton max in four years to main­tain rev­enue neutrality;
  • It low­ers the retail sales tax by 1%;
  • It funds the Work­ing Fam­i­lies Rebate (an attempt to cre­ate a state-lev­el earned income tax cred­it) so qual­i­fy­ing fam­i­lies see their oblig­a­tions reduced. This is $1500 per fam­i­ly annu­al­ly for up to 400,000 families.

Pro­po­nents of I‑732 are mar­ket­ing the ini­tia­tive as a high­ly pro­gres­sive change to our tax code, pri­mar­i­ly because it funds the Work­ing Fam­i­lies Tax Rebate and gives earned income cred­it to qual­i­fy­ing low income fam­i­lies. This is a nice fea­ture, but what does this tax swap do to fam­i­lies that can­not qual­i­fy for earned income credit?

I‑732 redis­trib­utes B&O tax oblig­a­tions to all Wash­ing­ton State res­i­dents by impos­ing a car­bon tax. Shift­ing tax oblig­a­tions from busi­ness­es and trans­fer­ring them to low and mid­dle income fam­i­lies is not a pro­gres­sive tax maneu­ver. It is true that busi­ness­es will pay a car­bon tax, as well, but that is also a regres­sive choice.

Busi­ness­es and cit­i­zens who have the means to aggres­sive­ly able to low­er their car­bon emis­sions are the ones who will pay the least tax.

Who are those peo­ple? They are the wealthy who can afford to solar­ize, replace their win­dows, insu­late their walls, and buy effi­cient appli­ances and elec­tric cars. Those who can­not choose to make these changes are trapped pay­ing an ever-increas­ing tax. And they con­tin­ue to pay that tax, even though they can­not con­tribute to low­er­ing emis­sions in a sig­nif­i­cant way.

There is noth­ing in I‑732 that helps low and mid­dle income fam­i­lies improve their ener­gy effi­cien­cy or decrease their depen­dence on fos­sil fuels.

What’s more, Wash­ing­ton State’s “big pol­luters” are most­ly ener­gy sec­tor com­pa­nies. What does it mean to impose a car­bon tax on a com­pa­ny that runs on, or sells, fos­sil fuels? We know that some­times, big cor­po­ra­tions make emp­ty threats about pass­ing costs onto their cus­tomers. But I‑732’s own pro­po­nents have acknowl­edged that Wash­ing­ton fam­i­lies will be direct­ly impact­ed.

What does I‑732 look like from a 20,000 foot view? Well, after two years of phas­ing in, it starts at $25 per ton and can grow to $100 per ton. As acknowl­edged by pro­po­nents, this is 25 cents per gal­lon at the pump that can grow to $1 per gal­lon, plus the rel­e­vant tax­es on util­i­ties. Details about the tax rate vary from house­hold to house­hold, depend­ing on the fuel mix that it uses.

Car­bon­WA claims that at around 25 cents per ton, elec­tric­i­ty will be taxed around 1 cent per kwh, and nat­ur­al gas at around 13 cents per therm.

That is a mod­est 8% to 10% increase at my house. When the rate increas­es by a fac­tor of four, though, it’s blis­ter­ing. And because it is tied to non-dis­cre­tionary pub­lic sec­tor bud­gets, it will nev­er go away.

Car­bon­WA claims that a 1% sales tax decrease will off­set this tax for most fam­i­lies. That might be true for wealthy house­holds that have a lot of dis­cre­tionary income. Low and mid­dle income house­holds spend much more mon­ey on food, trans­porta­tion, hous­ing, and util­i­ties as a per­cent­age of their bud­get – all expens­es that are not sub­ject to sales tax. The cor­re­spond­ing decrease in the sales tax would­n’t amount to much more than a hun­dred bucks a year.

A fam­i­ly of four in Wood­inville that makes $50,000 to $60,000 per year can deduct $813 in state sales tax on their fed­er­al income tax return. The 1% state sales tax reduc­tion for this tax­pay­er amounts to about $125 annu­al­ly. Car­bon­WA tells us that this off­sets this family’s car­bon tax expenditures.

Sup­pose that this is true for the aver­age house­hold at the intro­duc­to­ry rate. If the ini­tia­tive expects to low­er emis­sions of CO2, methane, and oth­er air pol­lu­tants at all, that rate will have to increase sharply. At a rate of $100 per ton, that off­set is not even close. And con­sid­er that I‑732 pays up to $1,500 per year into the Work­ing Fam­i­lies Tax Rebate to off­set the car­bon tax for one low income household.

This rais­es the ques­tion: is I‑732 actu­al­ly about low­er­ing emis­sions? Can we expect car­bon emis­sions to drop and pain­less­ly main­tain rev­enue neu­tral­i­ty over time? Who is it pain­less for? Or is the goal of the ini­tia­tive to replace a statewide pro­duc­tion tax with a con­sump­tion tax?

Pro­po­nents of I‑732 like to point to British Columbi­a’s expe­ri­ence, cit­ing our north­ern neigh­bor as a role mod­el. But as Jens Wiet­ing of the Sier­ra Club of B.C. point­ed out in a post for The Huff­in­g­ton Post last year, the province is no cli­mate action leader. It has a car­bon tax, but its emis­sions are going up, not down!

If you live in British Colum­bia you might think that our province is a cli­mate cham­pi­on, because you heard it from our government.

Last month, for exam­ple, the provin­cial gov­ern­ment sent out a bold press release tout­ing B.C. as a world leader in cli­mate action. The release high­light­ed B.C.’s car­bon tax and the accom­plish­ment of “meet­ing our 2012 GHG reduc­tion target.”

How­ev­er, just a few days lat­er, the Cana­di­an gov­ern­ment released its lat­est green­house gas emis­sions data show­ing that B.C.’s emis­sions actu­al­ly increased by 2.4 per cent in 2013 (to 63 mil­lion tons of green­house gas­es, from 61.5 in 2012. This is a big deal, because the threat of glob­al warm­ing has reached a point at which we can­not afford our annu­al emis­sions to con­tin­ue to increase.

What about envi­ron­men­tal and social jus­tice? Many peo­ple get by on fixed or lim­it­ed incomes. They are not in a posi­tion to low­er their emis­sions much.

Geo­graph­i­cal­ly speak­ing, Cen­tral and East­ern Wash­ing­to­ni­ans could be more affect­ed by I‑732 than their fel­low cit­i­zens on the west­ern side of the Cas­cades because their cli­mate fea­tures more extreme tem­per­a­tures (cold­er win­ters mean high­er heat­ing bills, hot­ter sum­mers neces­si­tate air con­di­tion­ing for com­fort) and their trans­porta­tion expens­es can be high­er due to liv­ing fur­ther away from places of busi­ness like the gro­cery store or doc­tor’s office.

If the rev­enue from I‑732 were going to invest­ments that would speed our tran­si­tion to a clean ener­gy econ­o­my, that’d be one thing.

But that’s not the case. Pro­po­nents of I‑732 delib­er­ate­ly cre­at­ed a pro­pos­al that would­n’t result in any fund­ing for envi­ron­men­tal­ly friend­ly infra­struc­ture, whether that be light rail, weath­er­ized schools, or any­thing else.

Walk through a neigh­bor­hood in any city, and start mak­ing a men­tal inven­to­ry of the infra­struc­ture changes that need to take place in order to sub­stan­tial­ly reduce the air pol­lu­tion that is dam­ag­ing our cli­mate. It is daunt­ing – espe­cial­ly in neigh­bor­hoods where low and mid­dle income peo­ple live. Upgrad­ing the infra­struc­ture is often cost prohibitive.

What would an envi­ron­men­tal­ly just pol­lu­tion tax look like? Ide­al­ly, it would be tied to projects that low­er pol­lu­tion. It would tax only peo­ple and enti­ties that have the means to low­er their emis­sions in a mean­ing­ful way. It would be able to man­age a reduc­tion in rev­enue (as car­bon diox­ide and methane emis­sions fell) with­out hav­ing to raise rates to main­tain rev­enue neutrality.

We do need to put a price on pol­lu­tion. But the rev­enue we raise should go to pri­or­i­ties like solar­iz­ing neigh­bor­hoods, mak­ing renew­able ener­gy more acces­si­ble to low and mid­dle income fam­i­lies, pro­vid­ing zero emis­sions infra­struc­ture to city gov­ern­ments, and so forth. If we insti­tute a pol­lu­tion tax, then we have to make sure the peo­ple pay­ing the tax can reduce their depen­dence on fos­sil fuels, or that the projects we embark upon enable them to do so.

I‑732 does none of these things. It pro­pos­es to change the tax code in a vast­ly com­pli­cat­ed way – and one that ben­e­fits wealth­i­er peo­ple and wealth­i­er busi­ness­es over time. It tax­es peo­ple who are not in a posi­tion to change their emis­sions, and that will do noth­ing to address our pol­lu­tion problem.

To recap:

  • I‑732 is a regres­sive tax shift from busi­ness­es to fam­i­lies and indi­vid­u­als. Wealth­i­er fam­i­lies will be in a posi­tion to avoid the tax, while mid­dle and low income fam­i­lies will not. They’ll be trapped, because I‑732 does­n’t put the rev­enue it rais­es to work for the pub­lic goods need­ed to allow us to low­er our emis­sions on a mas­sive scale, nor will its off­sets be enough to allow most Wash­ing­to­ni­ans to light­en their envi­ron­men­tal foot­print on their own.
  • There is no rea­son to believe that I‑732 will reduce emis­sions sig­nif­i­cant­ly over time. Because its lever­age is exert­ed on peo­ple who do not have the means to change their behav­ior, there is a hard lim­it to its effect.

We can put a price on pol­lu­tion in a way that is both fair and effec­tive at low­er­ing emis­sions. To do that, though, we must first vote NO on I‑732 this November.

Adjacent posts

10 replies on “Why say NO to I‑732? It’s about justice — environmental and social justice”

  1. Is it just me or is NPI increas­ing­ly encour­ag­ing all of us pro­gres­sives to form a cir­cu­lar fir­ing line and pull the trig­ger. I‑732 is a fan­tas­tic pol­i­cy and we all need to be vot­ing yes in November.

    Don’t take my word on it — Read the most com­pre­hen­sive three part analy­sis of this pol­i­cy com­plet­ed by the Sight­line Insti­tute.

    “I‑732 would be the biggest improve­ment in the pro­gres­siv­i­ty of Wash­ing­ton’s state tax sys­tem in 40 years — an enor­mous gain for 460,000 low-income work­ing fam­i­lies” and “I‑732 would give Wash­ing­ton the continent’s, if not the world’s, most potent, per­sis­tent, and com­pre­hen­sive incen­tive to move swift­ly beyond dirty fos­sil fuels and to a car­bon-free future.”

    1. Greg, NPI announced its oppo­si­tion to I‑732 near­ly a year ago, while the sig­na­ture dri­ve for the ini­tia­tive was still ongo­ing.

      We have pub­lished sev­er­al posts since then reaf­firm­ing our position. 

      While we respect the folks over at Sight­line, we dis­agree with their assess­ment of I‑732. We’re dis­ap­point­ed both in Car­bon­WA for not lis­ten­ing to feed­back and in the Alliance for Jobs & Clean Ener­gy for fail­ing to hon­or its 2015 pledge to intro­duce an alter­na­tive to I‑732.

  2. There also appear to be some major errors in this analy­sis — Take for exam­ple the claim that a house­hold earn­ing $50,000 – $60,000 would only see $125 in tax rebates from the 1% sales tax reduc­tion. There is a very rep­utable source out there called, The Uni­ver­si­ty of Wash­ing­ton, who pro­duced a tax swap cal­cu­la­tor to ana­lyze I‑732. They esti­mate the tax rebate for that range is between $200->$230 – Learn the facts about how this would affect you and oth­er fam­i­lies using this tax swap cal­cu­la­tor.

    Check out how it affects low-income house­holds earn­ing $25k with 2 kids first. Low-income house­holds are the only dis­pro­por­tion­ate win­ners under this tax swap. The B&O tax reduc­tion match­es busi­ness­es’ added car­bon tax lia­bil­i­ty, and every­one else up and down the income spec­trum basi­cal­ly have a break even propo­si­tion because both ener­gy con­sump­tion and sales tax expen­di­tures grow in par­al­lel with growth in house­hold income.

    The excep­tion is Low income house­holds who get hun­dreds even thou­sands of extra dol­lars each year as a result of pass­ing I‑732. They are the only clear win­ners in this tax swap – except of course all of us who win by reduc­ing car­bon pol­lu­tion expect­ed to cost our state $3.8Billion/year by 2020.

    I am hap­py to engage in the dis­cus­sion about car­bon tax­es being an effec­tive pol­i­cy to reduce emis­sions, even with­out tar­get­ed invest­ments, any­time. I have a master’s degree in Sus­tain­able Ener­gy Engi­neer­ing and stud­ied car­bon poli­cies around the world for 15 years. Price alone absolute­ly reduces emis­sions – it’s worth not­ing 81% of experts agree that price is the most effi­cient car­bon reduc­tion mech­a­nism, and only 13% think tar­get­ed sub­sidy pro­grams like NPI is advo­cat­ing for here are more effective.

    It is true: When we get into adap­ta­tion, not car­bon reduc­tions, we will need to raise rev­enue – but don’t shoot the most effec­tive car­bon reduc­tion pol­i­cy down because it is only tak­ing a huge step in the right direc­tion not jump­ing all the way to the fin­ish line. “Per­fect ene­my of the good” much?

    Out­side of cli­mate adap­ta­tion there are lots of oth­er good rea­sons why we need to raise new rev­enue in our state. A great leader in this state Rep. Sharon Wylie said in her I‑732 endorse­ment quote “Like many in Wash­ing­ton I have polit­i­cal con­cerns about how we will raise the new rev­enue our State needs; but that is a sep­a­rate bat­tle. We can’t let the pol­i­tics of mon­ey pre­vent us from act­ing on climate”

    Luck­i­ly this year come Novem­ber we get to do both – Get a pro­gres­sive change to our tax code that makes pol­luters pay for the car­bon they emit while simul­ta­ne­ous­ly vot­ing to increase tax­es to fund a major infra­struc­ture invest­ment in Sound Tran­sit 3.

    Noth­ing, absolute­ly no part, of I‑732 pre­vents us from rais­ing tax­es for tar­get­ed invest­ments for any of the pro­grams our state needs. What it does do is put us on a nation lead­ing path towards reduc­ing our car­bon pollution.

    If you don’t believe car­bon pric­ing is work­ing in BC and around the world just google it – This isn’t just eco­nom­ic the­o­ry the empir­i­cal evi­dence on the ground in mul­ti­ple coun­tries ful­ly sup­port what lead­ing car­bon reduc­tion sci­en­tist advo­cate for. You can’t just take a sim­ple look at emis­sions and say how a pol­i­cy is effect­ing a com­plex econ­o­my. You need to use com­pa­ra­ble met­rics that can com­pare sim­i­lar juris­dic­tions and mit­i­gate mul­ti­ple effects simul­ta­ne­ous­ly to see how a pol­i­cy is effect­ing emis­sions. All the detailed stud­ies of BC come to the same con­clu­sion — BC would be pro­duc­ing sig­nif­i­cant­ly more CO2 emis­sions today if it didn’t have its rev­enue neu­tral car­bon tax in place. Car­bon prices change behav­ior, effi­cien­cy of new pur­chas­es, and strong­ly pro­mote new innovation. 

    Wash­ing­ton needs a car­bon tax and as you cor­rect­ly point out Andrew the Alliance did­n’t move for­ward with any pro­pos­al mean­ing the only way we get one right now is by Vot­ing Yes on 732. We can’t wait 4 more years to act on this issue that is destroy­ing the future of our chil­dren and future generations

  3. First — it would be bad prac­tice to use your tax swap cal­cu­la­tor to check you for errors. I used the Fed­er­al Sales Tax Deduc­tion Calculator:

    For para­me­ters, I entered I chose year 2015, at least $50,000 but less than $60,000, 4 exemp­tions, $0 in spe­cif­ic sales tax, 98072 for zip code, Wood­inville, King, Wa,did not move to a new res­i­dence in 2015

    The state tax amount is $813. This is the fig­ure that is affect­ed by I‑732. It gets dropped from 6.5% to 5.5%.

    $813(1-(5.5/6.5)) = $125. Not $230.

    And please under­stand that I am not argu­ing against a car­bon tax. I am argu­ing against I‑732 par­tic­u­lar­ly. It is regres­sive and unjust, and deflect­ing the con­ver­sa­tion only to fam­i­lies that qual­i­fy for earned income cred­it is mis­lead­ing by delib­er­ate omis­sion. We are talk­ing about peo­ple who do not qual­i­fy for the Work­ing Fam­i­lies Tax Credit.

    Last­ly, “we must pass this now, or the sky will fall on our chil­dren” is a log­i­cal fal­la­cy. We must do what is effec­tive and just if we want to pre­serve a future for our children.

  4. Thanks for your com­ment, Robin, and article.

    One cor­rec­tion — the UW Tax Swap cal­cu­la­tor is not my mod­el — It is pro­duced by the Uni­ver­si­ty of Wash­ing­ton. Not sure exact­ly who but sus­pect it is the eco­nom­ics depart­ment. They pub­lish their method­ol­o­gy which is on the page I linked to. I think the rel­e­vant excerpt is below. 

    “These per­cent­ages are for all sales tax­es (state plus local) and the Depart­ment of Rev­enue reports that the aver­age total sales tax rate in Wash­ing­ton State is 8.95 per­cent. Our pro­pos­al would reduce this by 1 per­cent­age point, i.e., to 7.95 per­cent, so we can com­bine all this infor­ma­tion to esti­mate the sales tax sav­ings for any giv­en house­hold. (Exam­ple: If your house­hold income is $55,000 then you pay an esti­mat­ed 3.7 per­cent of your income in sales tax­es, i.e., $2,035. So a one per­cent­age point reduc­tion would save you $2,035(1/8.95)=$227.) Final­ly, we smooth out the 2002 Tax Study esti­mates (see red line below) by using a pow­er series esti­mate (black line below) from Microsoft Excel. This smooths out the dis­con­tin­u­ous jumps evi­dent in (for exam­ple) going from an income of $19,999 to an income of $20,001. See Fig­ure 1 for more details.”

    As an ener­gy engi­neer, not an econ­o­mist, I am no expert on this aspect of the pol­i­cy. This is why it is so great to see the deep dive into fis­cal impacts of this pol­i­cy that was recent­ly pub­lished by the Sight­line Insti­tute in its 2nd arti­cle on 732. You being a physi­cist I’m sure rec­og­nize that com­plex ele­ments enter into any esti­ma­tion. I sus­pect the Uni­ver­si­ty of Washington’s approach may be more robust, up and down the income spec­trum, and more spe­cif­ic to our region rely­ing on DOR data rather than grab­bing a sin­gle data-point from the fed­er­al dataset. But I must yield to the experts at UW on this one.

    I am glad to know that you sup­port car­bon tax­es as we all should. Inter­nal­iz­ing exter­nal costs is the num­ber one way we can tran­si­tion our entire econ­o­my simul­ta­ne­ous­ly away from numer­ous pol­lu­tants. Inter­nal­iz­ing exter­nal­i­ties is one of the ten­ants of a per­fect mar­ket­place and can be used to off­set many of the direct and indi­rect sub­si­dies fos­sil fuels cur­rent­ly enjoy which is what got us into this cli­mate mess.

    As Sight­line points out in their third arti­cle, Cli­mate Jus­tice is a com­pli­cat­ed and polit­i­cal­ly charged issue. There are dif­fer­ent approach­es to over­com­ing it and all that have their pro’s and con’s. I will try to wade cau­tious­ly into this top­ic and encour­age oth­ers to cor­rect me where I am wrong. These are com­plex top­ics and so many peo­ple are suf­fer­ing so might­i­ly right now which makes this a very dif­fi­cult top­ic. I ful­ly under­stand and appre­ci­ate your desire for tar­get­ed invest­ments in dis­ad­van­taged com­mu­ni­ties to ease that suf­fer­ing. Done prop­er­ly I am sup­port­ive of these approach­es, and it is true I‑732 doesn’t do every­thing our State needs to do with­in a sin­gle policy. 

    In no way how­ev­er does I‑732 pre­vent tar­get­ed invest­ments from occur­ring in our State. It sim­ply doesn’t fund them because it is a tax swap, that doesn’t fund any­thing, it just shifts our exist­ing tax bur­den away from fam­i­lies and onto pol­lu­tion. The state is in no worse a posi­tion, arguably a bet­ter one, to raise tax­es for tar­get­ed invest­ments post I‑732’s pas­sage due to the cre­ation of a new tax stream, and the reduc­tion of the state sales tax which relieves pres­sure on cities that are reach­ing a 10% psy­cho­log­i­cal cap. Per­son­al­ly I think tar­get­ed invest­ments may be bet­ter achieved by local city and coun­ty tax increas­es and pro­grams as they are more in touch with their com­mu­ni­ties. All par­ties (OFM, Sight­line & Car­bon­WA) agree I‑732 will increase local rev­enue across the state due to increased retail sales and man­u­fac­tur­ing trans­ac­tions mak­ing them an inter­est­ing place to start those tar­get­ed infra­struc­ture invest­ment dis­cus­sions as soon as 732 pass­es. Local pro­grams of course come with their own pro’s and con’s but there is expect­ed to be about $156M in new local rev­enue over four years.

    How­ev­er I must protest. Just because I‑732 doesn’t com­plete­ly solve cli­mate jus­tice and the greater equi­ty and racial injus­tices in our state doesn’t mean that it is unjust and shouldn’t be passed. For many, name­ly the 460,000 fam­i­lies that qual­i­fy for the work­ing fam­i­ly tax rebate, pass­ing I‑732 will make their lives much, much, bet­ter. I sus­pect we agree that the WFTE is one of “the most effec­tive tool we have for lift­ing chil­dren and fam­i­lies out of pover­ty” and a 25% match of the Fed­er­al EITC is very good thing for this state. I‑732 offers Wash­ing­ton a huge pro­gres­sive change to our tax code in Novem­ber while reduc­ing the pol­lu­tion that effects low-income com­mu­ni­ties the most.

    For every­one else the finan­cial impact is fair­ly neu­tral. I rec­og­nize, and feel great empa­thy, sur­round­ing the crit­i­cism that it is a hurt­ful pri­or­i­ti­za­tion to pro­mote a pol­i­cy that helps lift 460,000 low-income fam­i­lies out of pover­ty but leaves 340,000 in the same ter­ri­ble sit­u­a­tion as they are cur­rent­ly in. I would argue it is more hurt­ful to pro­mote doing noth­ing to help those 460,000 fam­i­lies which is the only choic­es we have before us when we vote Yes or No on 732 in November.

    It is impor­tant to empha­size that the oth­er 340,000 fam­i­lies are not made worse off by I‑732 they are just left neu­tral as a result of swap­ping a regres­sive ener­gy tax for a regres­sive sales tax. Reduc­ing the most regres­sive part of our exist­ing tax code on every­one is a huge­ly impor­tant aspect of this pol­i­cy as it can be very dif­fi­cult to get a rev­enue gen­er­at­ing car­bon tax to avoid a net neg­a­tive impact for almost all low-income house­holds — espe­cial­ly undoc­u­ment­ed workers.

    Obvi­ous­ly there are sit­u­a­tions where an unem­ployed moth­er rid­ing the bus to inter­views is a low ener­gy user and will come out ahead. And there are sit­u­a­tions where fam­i­lies will end up pay­ing slight­ly more ener­gy tax­es than they see in sales tax reduc­tions. But these vari­a­tions are small +/- $10’s of dol­lars per year accord­ing to Sightline’s first arti­cle.

    I real­ly hope we can unite togeth­er to take a step in the right direc­tion in Novem­ber. It pains me to see pro­gres­sives pro­mot­ing that Wash­ing­ton should sit idle on car­bon pric­ing and pro­gres­sive improve­ments to our tax code in the hopes of get­ting fur­ther down this impor­tant path in the future.

  5. Well, a recent Seat­tle Times arti­cle about their ST3 tax cal­cu­la­tor esti­mates that a fam­i­ly mak­ing $45,000 to $55,000 a year spends an aver­age of $1,988 for state and local sales tax­es. This is actu­al­ly a lit­tle more than the $1,821 that Car­bon Wa’s cal­cu­la­tor esti­mates for a house­hold mak­ing $50,000 a year, and it’s near­ly twice the $1,076 esti­mate that the IRS cal­cu­la­tor Robin relies on here produces.

    The Times arti­cle also says: “If that seems high, these state fig­ures indeed far exceed what’s spit out by the fed­er­al IRS deduc­tion cal­cu­la­tor, because the feds ignore your spo­radic major pur­chas­es, unless you report those.” (You report the sales tax on major pur­chas­es, like buy­ing a car or build­ing mate­ri­als for a ren­o­va­tion, in the box that the IRS pro­vides for “sales tax paid on spec­i­fied items,” where Robin entered $0.)


  6. Thank for your com­ment, Thad.

    The $813 I cite in the post is the state sales tax amount, which is sub­ject to 6.5% state sales tax. The full (state plus local) amount from the Feds is $1131.95 for this income bracket.

    The rea­son I chose this fig­ure is that I think it is fair­ly accu­rate — and using it didn’t require me to make hid­den assump­tions. I also chose to roll back the state sales tax from 6.5% to 5.5%, and we don’t have to think about local retail taxes. 

    To your com­ment, though:

    Let’s assume that total sales tax is 9.6% every­where. Let’s also assume that this family’s tax­able income is $60,000, and that they pay about $10,000 in Fed­er­al Income Tax — so their net income is $50,000. It’s approx­i­mate and makes the num­bers sim­ple. If we low­er the state sales tax from 9.6% to 8.6%:

    · The IRS cal­cu­la­tor amount, $1131.95, gives a break of $118 annually.

    · Seat­tle Times amount, $1988, gives a break of $222 annually.

    · The Car­bon­Wa amount, $1821, gives a break of $203

    It’s clear­er to think of the total amounts spent on sales tax­able items, though. At 9.6%:

    · If this fam­i­ly pays $1131.95 in sales tax, they spent $11,791.15 in sales tax­able items. That’s 24% of their net income.

    · If this fam­i­ly pays $1988 in sales tax, they spent $20,708.33 on sales tax­able items. That’s 41% if their net income.

    · Car­bon­Wa’s esti­mate assumes they spend 38% of their net income on sales tax­able items — $18,968.75. I think that’s unrealistic.

    This fam­i­ly pays rent, buys gro­ceries and gas, pays util­i­ties, insur­ance, med­ical care…none of which are sub­ject to sales tax. They might be buy­ing a new car or lum­ber and pay a lot of sales tax once or twice in a decade, but they aren’t doing this year after year. I think both Car­bon­Wa and ST3 are unre­al­is­ti­cal­ly high estimates.

    But my larg­er point — reduc­ing a rel­a­tive­ly small amount by a small amount gives an excru­ci­at­ing­ly small amount. I‑732 will cost this fam­i­ly more than $17 per month.

    The 1% sales tax might be “a wash” for wealthy peo­ple who have a lot of mon­ey to spend on retail sales tax­able items. For mod­er­ate income peo­ple, that isn’t the case. 

    To repeat — I agree that sales tax is regres­sive. Because of the exemp­tions, rolling that tax back a lit­tle bit is not, a pri­ori, progressive.

  7. Thanks for your com­ment, Greg, and for the oppor­tu­ni­ty to respond to a num­ber of points.

    My objec­tion to using the tax cal­cu­la­tor for the pur­pose of this dis­cus­sion is that it doesn’t make sense to use your cal­cu­la­tor to check the results of your cal­cu­la­tor, so to speak. If we’re test­ing the result, we need to use some­thing oth­er than CarbonWa’s tax cal­cu­la­tor to get the result. “Check our tax cal­cu­la­tor” isn’t a crit­i­cal approach.

    But no mat­ter – let’s use your num­bers: Net house­hold income $55,000 that pays $2035 in sales tax per year at 8.95%. This fam­i­ly spent $22,737 on sales tax­able items. That’s 41% of their income. I don’t think that’s pos­si­ble. Maybe occa­sion­al­ly, but not year after year. Rent, util­i­ties, gro­ceries, insur­ance, med­ical expens­es, gaso­line – Wash­ing­ton State fam­i­lies don’t pay sales tax on these pri­ma­ry bud­get items. 

    That, and the ben­e­fit of $227 is about $19 per month. Do real­ly you think that approach­es what I‑732 will cost this family? 

    GR: “As an ener­gy engi­neer, not an econ­o­mist, I am no expert on this aspect of the pol­i­cy. This is why it is so great to see the deep dive into fis­cal impacts of this pol­i­cy that was recent­ly pub­lished by the Sight­line Insti­tute in its 2nd arti­cle on 732. You being a physi­cist I’m sure rec­og­nize that com­plex ele­ments enter into any esti­ma­tion. I sus­pect the Uni­ver­si­ty of Washington’s approach may be more robust, up and down the income spec­trum, and more spe­cif­ic to our region rely­ing on DOR data rather than grab­bing a sin­gle data-point from the fed­er­al dataset. But I must yield to the experts at UW on this one.”

    Since you are an ener­gy engi­neer, I’m glad we can have this dis­cus­sion – and hope there are many in the future. And I’m being respect­ful when I point out that you’ve just dis­missed me by say­ing “it’s com­pli­cat­ed” and that I should trust the big boys at Uni­ver­si­ty of Wash­ing­ton to get it right. 

    Please revis­it why I chose a fam­i­ly mak­ing $60k per year for this func­tion­al analysis:
    •It’s real­ly hard to find a sce­nario where this fam­i­ly will qual­i­fy for the Work­ing Fam­i­lies Tax Rebate,
    •it’s greater than the
    per capi­ta per­son­al income in Wash­ing­ton State,
    •it’s greater than the aver­age income in Wash­ing­ton State,
    •it meets or exceeds Wash­ing­ton State’s aver­age cri­te­ria for qual­i­fy for two-bed­room hous­ing, which is around $46k state wide and $60k in King and Sno­homish counties,
    •it rep­re­sents Wash­ing­to­ni­ans from many walks, includ­ing retired peo­ple, young fam­i­lies, and work­ers in a vari­ety of eco­nom­ic sectors.

    This exam­ple encom­pass­es a lot of data. I chose to tell the sto­ry of one rep­re­sen­ta­tive fam­i­ly because it makes the sto­ry clear­er, and makes it hard­er to sweep unfor­tu­nate facts under the rug by say­ing, “it’s complicated.” 

    The $60k fam­i­ly choice is more rel­e­vant than you’re sug­gest­ing – it is not just a sin­gle data point. And yield­ing to the experts is appeal­ing to author­i­ty. This one you can do with pen­cil and paper.

    To your ref­er­ences about the Sight­line series on I‑732: I have a healthy mea­sure of respect for Sight­line, but in this case I dis­agree with their ulti­mate con­clu­sions. I agree with some of their analy­sis, though – and I nev­er require I‑732 to do every­thing our state needs in a sin­gle pol­i­cy, as you sug­gest. The only thing I require here is that I‑732 is fair and that it is effec­tive at low­er­ing car­bon emissions.

    Sight­line is, for exam­ple, high­ly crit­i­cal of I‑732 for dis­pro­por­tion­ate­ly impact­ing com­mu­ni­ties, includ­ing some 340,000 low income fam­i­lies that do not qual­i­fy for earned income cred­it. These aren’t the mod­er­ate income peo­ple I’m talk­ing about in the orig­i­nal post – they are gen­uine poor peo­ple – many who live on fixed incomes.

    Con­sid­er Sightline’s “right price” for meet­ing the 2050 goal:

    ”I‑732 near­ly hits the mark. The I‑732 tax starts at $15 per ton in 2017, goes up to $25 in 2018, then increas­es at 3.5 per­cent plus infla­tion every year until 2059, when it hits our mid-cen­tu­ry tar­get of $100 and flat­tens out, increas­ing each year only at the rate of infla­tion. (Assum­ing 2 per­cent annu­al infla­tion, the price will be $225 in nom­i­nal dol­lars in 2059.)”

    At $100 per ton, this is cer­tain­ly not a neu­tral tax swap for poor peo­ple who do not qual­i­fy for your tax rebate. It also isn’t neu­tral for mod­er­ate income people. 

    Like Sight­line, I think it is nec­es­sary to put a price on car­bon. A well-exe­cut­ed car­bon tax is a great idea. How it is done mat­ters a lot, though, so I dis­agree with their con­clu­sions about I‑732. The orig­i­nal post isn’t about Sight­line, though, so maybe we can have that dis­cus­sion offline or NPI will enter­tain a post on the matter.

    Pro­po­nents of I‑732 treat the inverse rela­tion­ship between tax­a­tion and con­sump­tion as if it’s axiomat­ic. That assump­tion would work well if we were talk­ing about a tax on soda. If you levy a tax on soda, peo­ple will drink less of it. The rela­tion­ship is sim­ple because soda is not nec­es­sary for sur­vival or for keep­ing the econ­o­my afloat.

    The rela­tion­ship is not so direct when you tax neces­si­ties. The prob­lem a car­bon tax faces – the prob­lem we both face because we are ulti­mate­ly allies on the long road to putting a price on car­bon – is that car­bon is an eco­nom­ic neces­si­ty. Some peo­ple will con­tin­ue to use it because their cur­rent real­i­ty gives them no choice. That impos­es a hard lim­it to the tax’s effectiveness.

    This is a pri­ma­ry rea­son why infra­struc­ture improve­ments must be a com­pul­so­ry part of a car­bon tax. Some infra­struc­ture changes will hap­pen – in wealthy house­holds and com­mu­ni­ties. This is cost pro­hib­i­tive in low­er income com­mu­ni­ties, though. That is why we must invest in infra­struc­ture as part of the tax sys­tem – or we won’t low­er car­bon emis­sions enough. Peo­ple have to do more than sim­ply decide that they aren’t going to use fos­sil fuels any­more in order to give them up.

    We know how hard it is to get any envi­ron­men­tal pol­i­cy or reg­u­la­tion passed – and when­ev­er the debate comes up in our leg­is­la­ture, there is a clear risk that what reg­u­la­tions we have will get rolled back. The assump­tion that we can expect to pass envi­ron­men­tal­ly sound laws as we go (and I promise that I have a lot of sym­pa­thy for this idea) is not a polit­i­cal real­i­ty in Wash­ing­ton State. 

    Take, for exam­ple, the fact that Repub­li­cans are already using I‑732 as an excuse to roll back envi­ron­men­tal reg­u­la­tions in Wash­ing­ton State. Joe Ryan’s hope for the leg­is­la­ture to pass an I‑732B that fix­es CarbonWa’s over­sight grant­i­ng near­ly $1B in tax breaks to Boe­ing over four years met with such opposition:

    “Sen. Doug Erick­sen, R‑Ferndale, who chairs the Sen­ate Ener­gy, Envi­ron­ment and Telecom­mu­ni­ca­tions Com­mit­tee, said any alter­na­tive I‑732 ver­sion he’d back would have to bal­ance its car­bon tax with roll­backs of oth­er envi­ron­men­tal reg­u­la­tions — includ­ing a pro­hi­bi­tion on a car­bon-emis­sions cap under devel­op­ment by Gov. Jay Inslee’s administration.

    “It def­i­nite­ly would be a heavy lift,” Erick­sen said.”

    GR: “In no way how­ev­er does I‑732 pre­vent tar­get­ed invest­ments from occur­ring in our State. It sim­ply doesn’t fund them because it is a tax swap, that doesn’t fund any­thing, it just shifts our exist­ing tax bur­den away from fam­i­lies and onto pollution…” 

    Nobody here said that I‑732 pre­vents tar­get­ed invest­ments from occur­ring. I stat­ed in the orig­i­nal post that invest­ments in infra­struc­ture will occur for the wealthy, and not so much for mod­er­ate and low income peo­ple. That is the basis of how this tax swap becomes painful­ly regres­sive. The abil­i­ty to mit­i­gate car­bon con­sump­tion by upgrad­ing infra­struc­ture is a func­tion of wealth. Wealthy peo­ple and com­mu­ni­ties can build infra­struc­ture and avoid pay­ing the car­bon tax – poor peo­ple and com­mu­ni­ties can’t. Over time, the poor folks are stuck pay­ing the tax while the wealthy get a break.

    And again – because of the exemp­tions that already exist in the Wash­ing­ton State sales tax, the 1% roll­back doesn’t help poor folks much. It does give a nice lit­tle some­thing to wealthy peo­ple who have dis­cre­tionary income to spend on sales tax­able items, though.

    GR: It is impor­tant to empha­size that the oth­er 340,000 fam­i­lies are not made worse off by I‑732 they are just left neu­tral as a result of swap­ping a regres­sive ener­gy tax for a regres­sive sales tax. 

    I‑732 pro­po­nents make great hay about incor­po­rat­ing a nec­es­sary tax break to 460,000 qual­i­fy­ing fam­i­lies so they do not feel the effects of the car­bon tax – they shout it from the rooftops as a basis for their claims that their pol­i­cy is pro­gres­sive. But you say that the 340,000 fam­i­lies in the same income brack­et who don’t qual­i­fy are only going to expe­ri­ence a neu­tral tax swap. These things can­not be simul­ta­ne­ous­ly true. 

    What is the pur­pose of this tax break? Does it actu­al­ly have any­thing to do with car­bon emis­sions, or is it just a shiny object that Car­bon­Wa can dan­gle in front of pro­gres­sives? Does it even qual­i­fy as pro­gres­sive if it leaves more than 40% of poor folks behind? 

    To be clear, I am not crit­i­ciz­ing the con­cept of pay­ing into the Work­ing Fam­i­lies Tax Cred­it. I just object to your def­i­n­i­tion of “pro­gres­sive” and the lack of fair­ness it creates.

    And I dis­agree that the effects on the 340,000 are neu­tral. Sight­line tells you why, even. Their con­clu­sion to sup­port I‑732 “because the price is right” sug­gests that the price might need to be $150 per ton to hit pro­ject­ed tar­gets at mid-cen­tu­ry:

    “To achieve Washington’s state statu­to­ry goal of cut­ting green­house gas emis­sions 50 per­cent below 1990 lev­els by 2050, US eco­nom­ic mod­els sug­gest the pol­lu­tion price on the trans­porta­tion and elec­tric sec­tors prob­a­bly needs to reach $100 to $150 per ton [2016 dol­lars] by 2050.”

    Once again – because of the exemp­tions inher­ent in the Wash­ing­ton State sales tax, poor peo­ple pay very lit­tle in sales tax. Most of their income is spent on gro­ceries and things that aren’t sub­ject to sales tax. The 1% roll­back does not help them. Yet, they are pay­ing up to $100 per ton in car­bon tax­es under I‑732. This is a text­book exam­ple of “worse off.”

    GR: “Reduc­ing the most regres­sive part of our exist­ing tax code on every­one is a huge­ly impor­tant aspect of this pol­i­cy as it can be very dif­fi­cult to get a rev­enue gen­er­at­ing car­bon tax to avoid a net neg­a­tive impact for almost all low-income house­holds – espe­cial­ly undoc­u­ment­ed workers.”

    Again – I agree that sales tax is regres­sive. But because of the tax exemp­tions already inher­ent in Wash­ing­ton State’s tax code, it does not fol­low that sim­ply rolling it back by 10% is pro­gres­sive. Com­bined with the car­bon tax swap, I‑732 is a blis­ter­ing­ly regres­sive pol­i­cy – that becomes increas­ing­ly regres­sive as time pass­es because poor peo­ple and com­mu­ni­ties can­not invest in low-car­bon infra­struc­ture at the rate that wealthy ones can. And don’t for­get that poor peo­ple spend most of their income on things that are not sub­ject to sales tax – while wealthy peo­ple can see some real ben­e­fit from that 1% rollback.

    GR: “I real­ly hope we can unite togeth­er to take a step in the right direc­tion in Novem­ber. It pains me to see pro­gres­sives pro­mot­ing that Wash­ing­ton should sit idle on car­bon pric­ing and pro­gres­sive improve­ments to our tax code in the hopes of get­ting fur­ther down this impor­tant path in the future.”

    Respect­ful­ly, this is false equiv­a­lence. Vot­ing NO on I‑732 is not the same thing as sit­ting idle about car­bon pric­ing and pro­gres­sive improve­ments to our tax code.

  8. The Seat­tle Times arti­cle says that their cal­cu­la­tor is based on actu­al data — “fed­er­al stud­ies of con­sumer spend­ing pat­terns, plugged into a Wash­ing­ton state gov­ern­ment tax mod­el, rough­ly bro­ken out by income brack­et.” As Robin says, she “thinks” that the num­ber from the IRS cal­cu­la­tor is “fair­ly accu­rate,” with­out includ­ing the tax on any spe­cial items like buy­ing a car, and that she “thinks” the Times esti­mate is “unre­al­is­ti­cal­ly high.” I think it’s more rea­son­able to assume that the Fed­er­al stud­ies and the Wash­ing­ton Depart­ment of Rev­enue have a pret­ty good idea of how much of our incomes peo­ple in Wash­ing­ton pay sales tax on than to rely on our intu­itions about what’s “real­is­tic”.

    The pro­gres­sive part of I‑732 is not real­ly the 1% cut in the sales tax. That will leave peo­ple rough­ly even over­all, though there will be vari­a­tion depend­ing on all sorts of fac­tors. For exam­ple, Rebec­ca­’s hypo­thet­i­cal fam­i­ly gets their elec­tric­i­ty from Puget Sound Ener­gy — half of PSE’s pow­er comes from coal and nat­ur­al gas, and they’ll pay car­bon tax on that. If Rebec­ca­’s fam­i­ly lived eight miles east, in Seat­tle, or in a pub­lic util­i­ty dis­trict, almost all their pow­er would come from hydro, and they would­n’t be pay­ing any addi­tion­al tax on it. (If you care, you can get some sense of how dif­fer­ent fac­tors change the out­come with the UW calculator.)

    The pro­gres­sive effects of I‑732 will come from fund­ing the Work­ing Fam­i­ly rebate at 25% of the Fed­er­al Earned Income Cred­it. By acci­dent or design, Rebec­ca­’s fam­i­ly makes just a lit­tle too much to ben­e­fit from that. If they made $50,000 a year instead of the $60,000 in her exam­ple, they’d be get­ting an addi­tion­al $170 a year as a tax rebate.

  9. Thad,

    Sure­ly you can appre­ci­ate that the road to hell was paved with inten­tions based on “data”. It is a fair guess that a fam­i­ly on a $60k income does not buy a car every year. If they buy a car this year, what will they buy next year? So, yes, I think the ST3 cal­cu­la­tor gives esti­ma­tions that are unre­al­is­ti­cal­ly high – and I think the Car­bon­Wa cal­cu­la­tor acts similarly.

    Do you “think” the IRS uses data in their estimations?

    The ST3 cal­cu­la­tor doesn’t actu­al­ly use data, by the way. It uses the sales tax cal­cu­la­tor cre­at­ed by the State of Wash­ing­ton. I still think its esti­ma­tions are unre­al­is­ti­cal­ly high. I think the IRS esti­ma­tion is better. 

    But this point you’re mak­ing is real­ly a red her­ring. My argu­ment would be exact­ly the same, even if I’d cit­ed num­bers from the ST3 cal­cu­la­tor in the orig­i­nal arti­cle. The point is that a small amount of a rel­a­tive­ly small amount is an extreme­ly small amount.

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