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.
- 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.