By Diana Carlen
WAWG Lobbyist
This November, Washington voters will decide whether Washington state will be the first state in the nation to enact a carbon tax. The proposal, known as Initiative 732 (I-732), was drafted by a grassroots citizens group called Carbon Washington.
I-732 imposes an initial $15 tax on carbon emissions from fossil fuels sold or used in Washington and the electricity generated by the consumption of fossil fuels beginning in July of 2017. The tax rises to $25 a ton on July 1, 2018, and every year thereafter by 3.5 percent plus inflation, until the tax is capped at $100 a ton.
I-732 has been touted as “revenue neutral” to the state budget because while tax revenues would increase for fossil fuels, it would be offset by decreases in other taxes including a lower sales tax rate of a percentage point (from 6.5 to 5.5 percent) and a lower B&O tax for manufacturers. However, state budget analysts have estimated that the carbon tax proposal would reduce state revenues by $915 million over four years. Carbon Washington disputes these findings, but has acknowledged that I-732 contains a drafting error which inadvertently grants a new $800 million tax break on the sale of commercial aircraft to Boeing and others.
While applauding efforts to reduce climate change, I-732 has lost some of its typical allies and divided the environmental community because of its revenue neutral approach. For example, the Washington State Labor Council AFL-CIO, the state’s largest labor organization, has publicly opposed I-732, along with the Washington Environmental Council and the Washington State Democratic Party. Many of these entities are members of a group known as the Alliance for Jobs and Clean Energy comprised of several prominent environmental, labor and social justice organizations. The alliance plans to introduce their own carbon reduction proposal in 2017 or 2018 that would not utilize the revenue-neutral approach of I-732, but instead generate new money for the state to use on environmental and other clean energy programs.
I-732 also faces opposition from the business community, which is concerned about raising fuel and energy costs with little or no environmental benefit while putting Washington at a competitive disadvantage with other states. Consumer groups are equally concerned with the impact the carbon tax will have on consumers since the tax on fossil fuels will be passed to customers at the gas pump and on utility bills. Carbon Washington acknowledges that an average family would pay a few hundred dollars more a year in carbon taxes through higher gasoline, heating and electricity costs, but says they would in turn save a few hundred dollars a year in sales taxes.
The agricultural community shares the concerns raised by the business community despite I-732’s attempt to alleviate the impact for farmers by phasing in the new tax at a lower rate for diesel, biodiesel or aircraft fuel purchased and used solely for agricultural purposes. Fuel is a major input at nearly every step of the agricultural process, and the costs are a larger share of the bottom line. This makes our state products less competitive in the global markets where we sell them. As commodity price takers, most producers have no way to pass the new carbon tax on to consumers and must absorb these costs themselves.
We will be updating you prior to November on I-732 as more groups weigh in and more data is known on the economic impact to consumers, businesses and agriculture.