Rampell: Washington state may yet lead on a carbon tax

By Catherine Rampell

The Evergreen State rejected the Green Wave last week. But there may yet be hope for it to one day wash ashore.

This past summer, Washington Gov. Jay Inslee, a Democrat, pitched his state to me as a model for the country, one that illustrated how Democrats could push through a popular, progressive and ecofriendly agenda that was good for the economy. Inslee highlighted a state ballot initiative he was backing, one to create the country’s very first carbon tax, Initiative 1631.

Over subsequent months, other Democrats told me they held hopes that Washington state’s proposal might offer a template for the party to run on in 2020.

A carbon tax, after all, offers a market-based approach for curbing the emissions that cause climate change. It can incentivize innovation for cleaner technologies and raise revenue in less distortionary ways than, say, income taxes. The idea is embraced almost universally by economists and has been endorsed by prominent Republicans.

Alas, Washington’s ballot measure failed spectacularly last week, receiving less than 44 percent of the vote. This was, in fact, the third time in two years that a carbon tax was rejected in the state: Earlier this year, the state legislature failed to pass a similar proposal and, in 2016, another ballot measure bombed.

There’s been some debate about what went wrong. The state is not exactly a bastion of conservatism, after all.

Maybe voters, bombarded with anti-tax propaganda for years, have soured on tax increases of any kind. In fact, in the decade before 2018, voters nationwide approved half of tax-increasing state ballot measures, according to Brookings Institution fellow Vanessa Williamson; last week, they approved only a handful.

This tax measure in particular also attracted an onslaught of negative advertising. A campaign organized by the Western States Petroleum Association raised $31 million — double the amount raised by the initiative’s supporters, and easily a record on any ballot measure in the state.

It is difficult to imagine the well-heeled fossil-fuel industry backing down in future fights over similar measures. But if we’re to continue pursuing this promising approach to combating climate change, we should think about how to better design and market it.

There’s a fair amount of consensus about what makes a carbon tax well-designed from an economic efficiency perspective: It should be broad-based, collected upstream rather than at the retail level (though at least some of the tax will get passed through to consumers through higher prices), etc.

The harder question has to do with what makes sense from a political economy perspective — including, what you do with the new money you collect.

Washington’s plan would have used the estimated $1 billion it raised annually by 2023 on new spending projects, generally related to environmental initiatives. Decisions on that spending would have been made by a governor-appointed board and the state’s utilities.

Which means proponents were basically telling voters that everyone would pay more money now and maybe get something in the future.

A simpler, more compelling design might have been to simply rebate the money directly to households on a lump-sum, per capita basis.

This would have had the virtue of being progressive, since low-income households tend to spend less than average in absolute dollar terms on carbon-intensive purchases, yet they would get the same rebate check amount as everyone else.

Washington was also in a bind because, well, one state going it alone on a pollution fee is not likely to put a dent in climate change.

“There’s no real rationale for why global warming should be addressed primarily at a local level,” says Williamson. “The scale and scope are wrong there.”

Asking a single state’s residents to take on a new climate-change policy might seem like an easier lift than pursuing a federal policy (and, true, California does have its solo cap-and-trade system). But if voters perceive a carbon tax as mostly symbolic, they might be less willing to absorb the associated pain — especially if they’re not getting the money back immediately, and they’re not convinced they’ll benefit anytime in the long run either.

Still, with inaction at the federal level, maybe a single state paving the way is our best hope for catalyzing broader action. Someone needs to lead. With lessons learned from this most recent failure, and more Democratic seats picked up in the state legislature — offering a firmer legislative route to passing a carbon tax — Inslee may yet be proved right in casting that leader as the state of Washington.

Catherine Rampell’s email address is crampell@washpost.com. Follow her on Twitter @crampell.