Editorial: I-732’s carbon tax creates uncertainty for state budget

By The Herald Editorial Board

The proposal is intriguing because it offers to take a notable bite out of carbon emissions and lower the state’s portion of the sales tax rate.

The first contributes to climate change and poor air quality, while the second is largely responsible for creating what many view as the most regressive state tax system in the nation.

Who wouldn’t vote for Initiative 732? Regrettably, you shouldn’t.

I-732, would establish a tax on carbon emissions, taxing industries, such as petroleum refineries, utilities and other industries, $25 for each ton of carbon they produce, increasing 3.5 percent plus the rate of inflation until reaching $100 a ton. But the revenue it would generate is intended to offset the reductions in the state sales tax and the state business and occupation tax for manufacturers. The state’s portion of the sales tax would be cut by a penny to 5.5 cents per dollar from its current 6.5 cents. The B&O tax for manufacturers also would be significantly reduced.

The revenue also would go toward an increase in funding of the state’s earned income tax credit for low-income working families as added assistance in paying more for gas and consumer goods. Some estimates have put the increase to fuel costs at 22 cents a gallon.

Proponents contend that the trade-off between a lower sales and B&O tax and an increase in the cost of gasoline and consumer goods would be a wash for many, though some might pay $100 to $200 more a year, while others could see a little extra in their pocket.

But it’s likely that the state would see a lot less in its General Fund pocket.

A financial impact statement by the state Office of Financial Management has estimated that in the first six fiscal years, if I-732 is adopted, the state’s General Fund would decrease by a net amount of $797 million.

Absorbing more than $265 million in revenue losses each biennium would only add to a difficult budgeting job ahead; the state will need to fund an estimated $3.5 billion in additional education spending to satisfy a state Supreme Court mandate to amply fund K-12 education.

Yoram Bauman, who as part of Carbon Washington proposed and has led the campaign for the initiative, disputes those numbers, pointing out that even the OFM analysts admit they are not “carbon tax experts.” Bauman believes OFM failed to account for the tax revenue that will be generated by exported power, fossil fuels burned within the state for electricity exported outside the state.

Even so, when Bauman met with The Herald Editorial Board, he admitted that the swap of revenue sources won’t be exact and estimated that the difference to the General Fund could be plus or minus $200 million a biennium.

Revenue forecasting is difficult enough now, without having to estimate what would come from a carbon tax.

And while it won’t generate any revenue for the state, we now have a carbon cap being put into place. At the direction of Gov. Jay Inslee, the state Department of Ecology in September announced its Clean Air Rule, which sets a limit on carbon for industrial producers. Phased in over the next 20 years the cap will reduce carbon dioxide emissions by 1.7 percent each year.

Assuming the cap survives challenges by industry and others, we will have the reductions in carbon that I-732 offers without the uncertainty it would bring to the state budget.

Fixing our regressive tax system will have to be left to another initiative or state lawmakers who can find the courage.

Talk to us

More in Opinion

toon
Editorial cartoons for Saturday, June 10

A sketchy look at the news of the day.… Continue reading

The WA Cares law is designed to give individuals access to a lifetime benefit amount that, should they need it, they can use on a wide range of long-term services and supports. (Washington State Department of Social and Health Services)
Editorial: What good is that new payroll deduction?

Along with a modest benefit for long-term care needs, it should prompt family discussions and planning.

Comment: Families living with Alzheimer’s can find support

For a job that no one asks for, it’s vital for family caregivers to know where to take their questions.

Comment: More dam studies won’t change what we know

Studying how to replace the carbon-free electricity of the Snake River dams ignores their other benefits.

Comment: Congress needs to fully fund bees’ highway habitat

Providing bees and butterflies with habitat along U.S. highways can assure their pollination work.

Dan Hazen
Forum: When pink slips go out, why can’t the best be kept on?

Union rules about who stays and who goes don’t seem to benefit students, schools or teachers.

Ron Friesen
Forum: We seem locked in cycle where we allow wealth to rule

Twice in America’s history we’ve allowed greed to lead at great cost to society. It’s happening again.

toon
Editorial cartoons for Friday, June 9

A sketchy look at the news of the day.… Continue reading

Phlebotomist Heather Evans preps JaNeen Aagaard a donation at Bloodworks NW Friday afternoon in Everett at July 3o, 2021.  (Kevin Clark / The Herald)
Editorial: Get back in (or start) your habit of giving blood

The pandemic’s effects and fewer younger donors too often leave blood supplies dangerously low.

Most Read