In this blog, I will analyze Initiative 1631, note some its major deficiencies, and suggest a far better approach (a revenue-neutral carbon tax that would improve Washington's regressive tax structure).
As I described in my previous blog, I am a strong believer in carbon taxes and was an enthusiastic supporter of the defeated Initiative 732. Mankind is doing too little to slow carbon emissions into the atmosphere, and a well-designed carbon tax or fee can use the free market to effectively respond to the problem. Economists of all political backgrounds acknowledge the power of taxing what you don't want (in this case emissions of carbon) in encouraging people to make different choices. Like driving smaller cars or switching to electric vehicles.
But Initiative 1631, whose goal is to initiate a carbon fee in Washington State, is deeply flawed and poorly constructed, and I believe destined for certain and dramatic defeat.
The Essentials
Initiative 1631 would establish a carbon fee that would slowly increase over time. Unlike Initiative 732, it would not be revenue neutral, but would use the proceeds of the fee to support climate justice, renewable energy, retraining, and other activities related to global warming impacts.
There are so many serious deficiencies with this initiative, one hardly knows where to begin.
1. How the money will be spent is vague
There are really no clear guidelines on how the money will be spent. 15% should address the "energy burden" of poor households, 10% goes to the Tribes, 35% to environmental justice, $50 million to help displaced fossil-fuel workers, and the rest to vague goals in supporting renewables and clean energy.
Decision authority on how the money will be spent will be given to a 15-member board appointed by the Governor to four-year terms, and would include one tribal representative, one representative of vulnerable populations/health action areas, and the six co-chairs of a collection of panels. So basically a group of liberal activists, appointed by a Democratic governor will make the decisions.
There is no strategic plan, no requirements for technical knowledge, and a guarantee the spending will be highly political. Not only is such a group practically guaranteed to spend the funds unwisely, but such a plan would certainly lose the support of moderates and Republicans.
Most folks are not willing to spend money when they don't know what they will get. That is the problem of I-1631. Can you imagine if the bill had specified real, tangible benefits? Such as supporting the rapid build out of rail from Seattle to its eastern/northern suburbs?
2. The Initiative Would Make Washington State's Regressive Tax Structure Even Worse
Whether the money comes from a tax or "fee", the effect is the same... to make the cost of carbon fuels more expensive. Money people will have to pay out. Unlike I-732, the proposed initiative will not return the funds to taxpayers, but use the funds for a wide range of unspecified activities that are somewhat connected to climate change in the minds of the oversight board.
The financial impacts of I1631 are clear: this is essentially a new tax that is not based on income. It will substantially raise the tax burden on everyone, including low-income folks, who are just as dependent on cars and trucks as anyone. Thus, just like the sales tax, it will be highly regressive, with the poor paying a higher percentage than their richer neighbors. The media has headlined our regressive tax structure in Washington State. I-1631 will make it much worse.
3. I-1631 is Highly Partisan
To pass in Washington State and to serve as a blueprint for action for other states, any carbon tax or fee must have bipartisan support. A revenue-neutral carbon tax could garner support from both sides of the aisle, as was true for for I-732. For example, ast year, major Republican figures came out in support of a national revenue-neutral carbon tax.
Unfortunately, it would be hard to design an approach more likely to turn off Republican and independent voters than I-1631. Not only is it not revenue neutral, but the funds are hardwired in the direction of Democratic supporters (labor, the tribes, minority and low-income "climate justice" groups). Even worse, the control of the funds is put in the hands of an oversight committee selected by a Democratic governor.
I-1631 is designed to reject the moderate and conservative electorate (e.g., nearly all of eastern Washington and Vancouver, WA) and will not be suitable to serve as an example to the nation.
4. I-1631 Gives Too Many Exemptions and to the Wrong Groups
To garner support, I-1631 gives exemptions to many business groups. For example, it exempts local power companies (e.g., PSE), which is a total mistake since it represents a major user of fossil fuels. The initiative also exempts coal-burning facilities (e.g., the Centralia coal plant), that offering perverse incentives to burn more coal, one of the dirtiest fuels. And there a dozens more exemptions that I won't list. I-732 did not do the exemption thing, but removed the B & O taxes to help businesses.
5. I-1631 Starts Off With Too Little Impact
This initiative begin with a fee of $15 per ton, which would increase gas prices by about 14 cents a gallon. Not enough to make folks alter their lifestyle or the vehicles they purchase. Everything we know about climate change tells us that a large and immediate reduction is needed. I-1631 starts weak, particularly compared to I-732, which began at $ 25 a ton of carbon emissions.
I could go further about the problems with I-1631, but you get the point: this is a hopelessly flawed initiative that not only won't effectively address climate change in our state and would waste huge sums of money, but it will needlessly politicize what should be a bipartisan effort. I should note that the key supporters of I-1631, The Alliance for Jobs and Clean Energy, the labor unions, and the Sierra Club actively opposed the revenue-neutral carbon tax (I-732).
Why? Clearly, because they did not gain access to the money. With I-1691 they would.
A Revenue-Neutral Approach: Far Superior By Any Measure
Now imagine a different approach, one in which a sufficiently large carbon tax is applied to encourage folks to reduce their carbon emissions. An approach that would refund ALL the money back to the people so they are not taking a financial hit. A revenue-neutral approach.
But it could be better than that, we can refund the carbon tax in a way that provides preferential relief to low-income people. There are many ways to do this. We might reduce the State sales tax by 1-2%, lessening the most regressive tax we have. Or we could give everyone back the same carbon tax dividend, which would preferentially help low income folks that can't afford the carbon rich lifestyle of the wealthy. Some funds could go into a low-income tax credit, as done in I-732.
Our state has the most regressive tax structure in the nation. The proper use of a carbon tax could help improve this dismal situation.
But it is even better than that. The carbon tax could be bipartisan, bringing the State together to begin to address the threat of anthropogenic global warming. And such a carbon tax could have legs, with the ability to spred to red and blue states around the union.
The question is not whether I-1631 will pass. It won't. Can you image folks taxing themselves to contribute to such a poorly designed and vague plan? Will low-income people willingly tax themselves hundreds of dollars a year to support the vague goals of some environmental activists? You know the answer.
The real question is what happens after I-1631 fails. Will the environmental left that killed I-732 decide to drop their financial demands and join in a bipartisan effort to deal with carbon emissions without social engineering and giveaways to their constituencies? We will see.
Climate change forced by increasing greenhouse gases is too serious an issue to waste time and effort, which is exactly what 1631 will do.
________________________________________
Announcement: The Northwest Weather Workshop is on April 27-28
The NW Weather Workshop is the big annual meeting for those interested in Northwest meteorology. This year we will have a major session on the meteorology of NW wildfires and others on other aspects of our regional weather. The gathering takes place at the NOAA facility in Seattle. To view the agenda and to register, go to the meeting website. The workshop is open to everyone, but registration is required.
Most folks are not willing to spend money when they don't know what they will get. That is the problem of I-1631. Can you imagine if the bill had specified real, tangible benefits? Such as supporting the rapid build out of rail from Seattle to its eastern/northern suburbs?
2. The Initiative Would Make Washington State's Regressive Tax Structure Even Worse
Whether the money comes from a tax or "fee", the effect is the same... to make the cost of carbon fuels more expensive. Money people will have to pay out. Unlike I-732, the proposed initiative will not return the funds to taxpayers, but use the funds for a wide range of unspecified activities that are somewhat connected to climate change in the minds of the oversight board.
The financial impacts of I1631 are clear: this is essentially a new tax that is not based on income. It will substantially raise the tax burden on everyone, including low-income folks, who are just as dependent on cars and trucks as anyone. Thus, just like the sales tax, it will be highly regressive, with the poor paying a higher percentage than their richer neighbors. The media has headlined our regressive tax structure in Washington State. I-1631 will make it much worse.
3. I-1631 is Highly Partisan
To pass in Washington State and to serve as a blueprint for action for other states, any carbon tax or fee must have bipartisan support. A revenue-neutral carbon tax could garner support from both sides of the aisle, as was true for for I-732. For example, ast year, major Republican figures came out in support of a national revenue-neutral carbon tax.
Unfortunately, it would be hard to design an approach more likely to turn off Republican and independent voters than I-1631. Not only is it not revenue neutral, but the funds are hardwired in the direction of Democratic supporters (labor, the tribes, minority and low-income "climate justice" groups). Even worse, the control of the funds is put in the hands of an oversight committee selected by a Democratic governor.
I-1631 is designed to reject the moderate and conservative electorate (e.g., nearly all of eastern Washington and Vancouver, WA) and will not be suitable to serve as an example to the nation.
4. I-1631 Gives Too Many Exemptions and to the Wrong Groups
To garner support, I-1631 gives exemptions to many business groups. For example, it exempts local power companies (e.g., PSE), which is a total mistake since it represents a major user of fossil fuels. The initiative also exempts coal-burning facilities (e.g., the Centralia coal plant), that offering perverse incentives to burn more coal, one of the dirtiest fuels. And there a dozens more exemptions that I won't list. I-732 did not do the exemption thing, but removed the B & O taxes to help businesses.
5. I-1631 Starts Off With Too Little Impact
This initiative begin with a fee of $15 per ton, which would increase gas prices by about 14 cents a gallon. Not enough to make folks alter their lifestyle or the vehicles they purchase. Everything we know about climate change tells us that a large and immediate reduction is needed. I-1631 starts weak, particularly compared to I-732, which began at $ 25 a ton of carbon emissions.
I could go further about the problems with I-1631, but you get the point: this is a hopelessly flawed initiative that not only won't effectively address climate change in our state and would waste huge sums of money, but it will needlessly politicize what should be a bipartisan effort. I should note that the key supporters of I-1631, The Alliance for Jobs and Clean Energy, the labor unions, and the Sierra Club actively opposed the revenue-neutral carbon tax (I-732).
Why? Clearly, because they did not gain access to the money. With I-1691 they would.
A Revenue-Neutral Approach: Far Superior By Any Measure
Now imagine a different approach, one in which a sufficiently large carbon tax is applied to encourage folks to reduce their carbon emissions. An approach that would refund ALL the money back to the people so they are not taking a financial hit. A revenue-neutral approach.
But it could be better than that, we can refund the carbon tax in a way that provides preferential relief to low-income people. There are many ways to do this. We might reduce the State sales tax by 1-2%, lessening the most regressive tax we have. Or we could give everyone back the same carbon tax dividend, which would preferentially help low income folks that can't afford the carbon rich lifestyle of the wealthy. Some funds could go into a low-income tax credit, as done in I-732.
Our state has the most regressive tax structure in the nation. The proper use of a carbon tax could help improve this dismal situation.
But it is even better than that. The carbon tax could be bipartisan, bringing the State together to begin to address the threat of anthropogenic global warming. And such a carbon tax could have legs, with the ability to spred to red and blue states around the union.
The question is not whether I-1631 will pass. It won't. Can you image folks taxing themselves to contribute to such a poorly designed and vague plan? Will low-income people willingly tax themselves hundreds of dollars a year to support the vague goals of some environmental activists? You know the answer.
The real question is what happens after I-1631 fails. Will the environmental left that killed I-732 decide to drop their financial demands and join in a bipartisan effort to deal with carbon emissions without social engineering and giveaways to their constituencies? We will see.
Climate change forced by increasing greenhouse gases is too serious an issue to waste time and effort, which is exactly what 1631 will do.
________________________________________
Announcement: The Northwest Weather Workshop is on April 27-28
The NW Weather Workshop is the big annual meeting for those interested in Northwest meteorology. This year we will have a major session on the meteorology of NW wildfires and others on other aspects of our regional weather. The gathering takes place at the NOAA facility in Seattle. To view the agenda and to register, go to the meeting website. The workshop is open to everyone, but registration is required.
