There are some interesting contests out there this year that do not involve a fat crybaby! With ColoradoCare sinking in the polls (for understandable reasons) all eyes turn to the other Washington for initiatives worthy of the great laboratories of democracy. There we have Proposition 732, the brainchild of the same economist who gave you this presentation. Prop 732 would:
- Impose a $15 per ton carbon tax in 2017 and $25 in 2018;
- Raise the tax thereafter at the rate of inflation+3.5% until it reaches $100 per ton (2048 at current inflation);
- Cut the state sales tax from 6.5% to 5.5%;
- Cut the business and occupation (B&O) tax on manufacturers or research from 0.484% to 0.001% of gross receipts;
- Raise the sales-tax refundable credit for low-income families rises from 10% of the federal EITC to 25%. For a family of four earning $40,000 per year, that would come to about $500, up from $200. For the same family at the poverty line ($24,000) the credit would be almost $800, up from a little over $300.
The idea is to replace some of the state’s most onerous business taxes with carbon taxes, while subsidizing the poorest citizens to protect them from rises in their electricity and gasoline bills. According to the state fiscal impact statement, the net result would be a small tax cut: by 2021, carbon tax revenues of $2.2 billion would replace lost B&O taxes of $470 million, lost sales taxes of $1.7 billion, and tax credits of $300 million, for a total tax cut of $250 million per year. For what it is worth, using the projections laid out in the impact statement, the loss would reach $620 million per year in 2048, when the carbon tax maxes out.
In fact, revenue losses will be greater, if the carbon tax leads to greater-than-expected cuts in the use of fossil fuels. But this should be measured against total state tax revenues, which are currently around $19 billion and should reach $25 billion (nominal) by 2021.
Okay, then! This sounds like a dream reform. Republicans get big cuts in taxes they hate and an overall tax cut. They also get rebates for the poorer GOP voters out in the eastern reaches of the state. Moreover, Washington has lots of hydropower (see picture). Including transport, it uses fossil fuels for only 53% of its energy. Power generators won’t like it, of course, but they can pass on most of the additional costs to consumers. Poorer consumers and industrial operations are protected. The middle class will lose economically, but help the environment.
Of course, I am sure most of you are now snorting. “Hah!” you think. “The GOP would never be so reasonable, not even up in deep blue Washington. And middle class people when push comes to shove won’t want to pay to save the environment. This is, like ColoradoCare, just a phantasm.”
You would be half right. There is opposition. Only ... and this is hard to believe ... it is not from the GOP or the middle class. The GOP is neutral. (Which is not to say that GOP voters are neutral; they oppose the initiative 48%-35%.) No, the goddamned opposition is from the Democrats.
Whaaaaa? No, really. The Democrats are angry that there will be a net tax loss, no matter how small. They do not think that a carbon tax should be offset at all. The Sierra Club is angry that the revenues are not used to subsidize renewables. Other lefty groups are angry because ... oh, who knows?
In short, with lukewarm Republican opposition, a carbon tax would sail through if the left supported it. But big groups do not, either because they have an anti-tax cut religion or because they want the revenues to buy their own pet rocks. How in the name of God you justify that position, I do not know. I invite a member of the Washington Sierra Club or Democratic Party to school me.