Everyone is focused on the bitterly contested Presidential election tomorrow, but important initiatives are being decided on state ballots. One of those is Washington’s Initiative #732, which would impose a carbon tax within the state. CF&P President Andrew Quinlan wrote today:
The biggest problem with the proposal is that it does practically nothing to address the issue for which it is supposed to help solve. If the state of Washington eliminated its greenhouse gas emissions in their entirety—an unrealistic and undesirable goal—the impact on average temperatures by 2100, according to the EPA’s own climate models, would by a reduction of a minuscule twenty-five one-hundred-thousandths of a degree.
…Although the environmentalist groups dislike the fact that the new tax aims to be revenue neutral—funds raised would be offset through tax credits and reductions in the state sales tax—that’s actually a potential positive. Generally speaking, laying taxes on activities you want to reduce, like carbon emissions in this case, is better than doing so on productive activities. After all, when you tax something, you will get less of it.
So shifting taxes from productive economic activities to those deemed to be destructive should be a benefit. Unfortunately, that benefit is illusory in this case.
All historical evidence suggests that politicians cannot be trusted to fulfill the promise of offsetting the revenue collected from a new tax. They may promise lower sales taxes in this case, but so long as the old tax still exists or can be easily reinstated, then the most likely outcome is that it will be raised back up to its original levels at the first opportunity. Washington residents will simply be stuck with even more taxes and no environmental gains to show for it.
Ryan Ellis also points out that the tax is not as revenue neutral as claimed:
The carbon tax revenue would be plowed into three offsetting items:
- A one percentage point reduction in the state sales tax (Washington State has no income tax)
- An elimination of the state’s gross receipts tax (on manufacturers only)
- Funding a state version of the federal earned income tax credit (EITC)
Only the first two of those three are tax relief. The third is pure spending, plain and simple. Because Washington State has no income tax, there is no income tax to credit low income households for paying. As a result, any check from the state to them is plainly and simply welfare spending. You can’t give a tax cut to a person who didn’t pay taxes.
…As a result, the carbon tax plan isn’t tax revenue neutral. It’s a net tax increase, to the tune of $200 million per year according to the initiative’s own supporters.
He further makes a similar point as Quinlan about the likelihood of future hikes:
It’s never a good idea to introduce a brand new kind of tax where one didn’t exist before. All taxes rise over time to their highest politically-sustainable level. The more taxes you have, the higher your overall tax burden will be.
Simply put, taxes cut by the initiative will eventually move back up, leaving Washington residents stuck payer higher energy bills and nothing to show for it.< They aren’t the only ones who should be concerned. Politicians both in other states and at the federal level will be watching closely. If they see that voters can be tricked into increasing their own tax burdens, you can bet there will be a flood of new attempts to do the same throughout the rest of the nation.
