Here’s the bill draft in both PDF and Word. And here’s the Letter of Recommendation with comments and suggested edits from the Code Revisers Office.
A brief overview of the bill: It imposes a carbon tax of $30/ton CO2 on fossil fuels (including the carbon content of imported electricity) and puts half the funds towards tax rebates and reductions and half the funds towards public investments in transportation. The transportation investments are allocated 50% to maintenance, 25% to transit, and 25% to freight mobility projects. The tax rebates and reductions are allocated to the Working Families Rebate (similar to the Earned Income Tax Credit bump-up in many other states that benefits low-income working families), a B&O business tax reduction for manufacturers, extension of the high-tech R&D tax credits, and an across-the-board property tax rebate.
Feedback welcome, and please note that this is a very early draft… lots of work to be done! I’m excited about the prospects of putting together a coalition of business/labor/enviros/social justice to push something like this forward, so please contribute your ideas as we work on a 2nd draft! (By the way we can’t formally file something for the Nov 2014 ballot until March at the earliest, so we have at least the next month to work on drafts.)
Update 2pm: A lot of good background info is at www.CarbonWA.org, especially this two-pager. And of course if you want to pledge to collect 1000 signatures (about 40 person-hours of work) please let me know!
Thank you for making excellent progress on this! Will need a talk points reference guide as I prepare to get signatures on the initiative. Lessons from BC (and others) and positive outcomes for WA (including appropriate literature). I also want material so I can visit with the Cascadia Chapter of the Sierra Club, Conservation NW, Washington Trails, etc.
Again, thank you!
Good idea, and there are some terrific graphics that show the success of the carbon tax in BC! Stay tuned…
This looks great. Thanks for your work on it. I do have a few questions.
1) About how much money is this expected to raise?
2) A sales tax reduction seems to me like a better choice for a broad based tax reduction than the property tax. But maybe I feel this way just because I am a renter 🙂
3) Why the high tech research tax credit? That seems to me to be fairly unrelated to the carbon tax.
Thanks for these comments and questions, Sally.
1) Revenue will be about $2.3 billion. See our two-pager (newly linked above in the update at the end of the post) for details.
2) A sales tax reduction is possible, but you can’t do a sales tax rebate in the same way that you can do a property tax rebate. (The exception here is the Working Families Rebate… but that’s another issue.) Also, I think that the risk of future sales tax increases might weigh against this idea. (I think there’s a much smaller risk of future increases in the state portion of the property tax.) Having said all that… a sales tax reduction is certainly worth considering!
3) Part of the high-tech R&D tax credit goes to green tech, so that’s one connection. It’s also a top priority for folks in the business world and so could help us with coalition-building.
Just my 2 cents…
Looks good to me. It is obvious that a lot of work has gone into it. Thanks. I am looking forward to campaigning for signatures.
According to EPA via wikipedia, Washington’s CO2 output in 2010 was 76,637,000 tonnes, so we’re talking about $2,299,110,000. On a per capita basis at 11.4 tonnes per person, it’s $342 per person. It will be important to calculate the corresponding decrease in other taxes, and to point out that carbon tax is paid by the emitter, thus saving tax money for people who are responsible for less-than-average emissions.
It would be a good idea to think through how to treat agricultural emissions. Farmers are used to not paying fuel tax for off-road equipment, so a carbon tax would represent a tax increase for them compared to the current situation.
The BC carbon tax covers all consumers of fossil fuels, including ag, and their view (I think rightly) is that once you start making exceptions the whole approach weakens. I would much rather focus on what kinds of public investments and tax reductions we can provide to offset impacts on ag, manufacturers, etc.
It’s disappointing that the draft has a lot of money going to transit and zero monies going to the least polluting transportation forms – walking and biking – while giving 25% to freight mobility projects. Walking and biking should get at least as much money as freight.
Many of the freight mobility projects are likely to increase carbon pollution, as they’re general highway expansions.
To change that, you probably would want an exception sort of like this phrase in the bill: “except that funding may not be provided to rail projects unless such projects will demonstrably not increase coal transport”
One simple cut: “except that funding may not be provided to projects that increase highway capacity.”
Very nice! I don’t feel qualified to give feedback but if you need help doing anything else, hit me up.
Thanks for the great ideas. I love your stand-up economist act. If this proposal does not fly, consider putting together a revenue neutral carbon tax which conservative Republicans can support, in which none of the money goes to government projects or programs. All of it goes back to the people. I suggest this because the Republicans are soon going to realize they cannot deny that climate change is happening. Wouldn’t be great to offer them a tax/rebate that is in line with Republican principles? Also, like the Alaska oil rebate, once people get that check, they will understand and support the tax/rebate, and they will support increasing the tax enough to have a real impact on purchasing choices. I am concerned that any other solution cannot produce a large enough tax to actually change our energy use habits. Thanks again for your efforts.
Thanks for these comments, Donna, and by the way we have looked at a revenue-neutral proposal, and will definitely pursue it if it looks promising. There are also terrific groups pushing this at the national level, e.g., the Energy & Enterprise Initiative.
YB: A comment via email:
“Reasonable” scientific estimates of carbon damages are a rapidly increasing function of time, and so must the tax to be meaningful, otherwise in a decade or so the tax will be meaningless.
See for example as a starting point: http://www.epa.gov/oms/climate/regulations/scc-tsd.pdf.
Also, the tax should also be applied as a port usage fee on coal exports, otherwise the damages we export will soon exceed the damages we cause locally.
On increasing the tax rate: I don’t think we should try to get too far ahead of the rest of the country, and I’d also note that $30 per tonne of CO2 is a pretty strong carbon price. For comparison, the Waxman-Markey bill from 2010 wasn’t expected to hit $30 per tonne of CO2 until about 2025. (See p26 here.)
On coal exports: I don’t know what a “port usage fee” is, so if you could elaborate that would be great. Also we need to be very careful about constitutional issues with the Dormant Commerce Clause.
Google for example on “Port of Seattle Taxes” and “Port of Seattle Tariffs” — clearly there is allowed to be tariffs and taxes on the use of a port in our state. Don’t know how high those rates can be before the Feds complain.
Again, you are missing the mark when you target liquid fossil fuels. $30 / ton corresponds to about $0.30 per gallon, which as BC has found does not affect consumption much. BUT, conversely, $30 / ton on Coal is a major game changer, given that the value of coal is so low, such that utilities, and exporters, would immediately switch over to “Plan B.”
YB: A comment via email:
Thank you for sharing the draft and inviting people to participate in the process of shaping the bill.
As I read the draft, I was wondering about the implications, such as
1) What will the new rules mean for coal (and other fossil fuels) transports through WA? It sounds like imported fuels are subject to the tax, but only those loaded onto a vessel to be used on the vessel itself are counted. It seems like this bill would provide an opportunity to address the coal transport issue, but it’s unclear to me whether it intends to do so in its current version.
2) What will the new rules mean for the average consumer? For example, if I fill up my tank in OR and drive to WA, will there be anything different from today? Are you generally expecting some slight price increases in fuels and certain other products or will consumers actually need to directly pay carbon taxes in certain cases?
3) The re-distribution mechanism seems well intended, but I’d be concerned about the complexity of the rules and the added bureaucracy which could make the new legislation unattractive and cumbersome to implement. Why not choose a simpler re-distribution? It feels like the bill is too specific in telling the govt how to spend the revenue instead of just requiring it to return 50% to taxpayers.
Thanks for your hard work on this important issue!
1) I’m not sure if we can include coal export, and as noted above (in the previous comment) we need to be very careful about constitutional issues with the Dormant Commerce Clause.
2) The carbon tax will apply “upstream” (i.e., to refineries and importers) and get passed on to end users. As a result the price of fossil fuels in WA will go up; see our two-pager for details. If you fill up in OR and drive into WA then you don’t pay the tax, just like folks who fill up in WA now and drive to BC don’t pay the tax.
3) I think we need to be specific about the revenue. A vague proposal will make people more skeptical and increase uncertainty. But you’re right that we need to try to keep this as simple as possible 🙂
YB: A comment via email:
For eventual marketing purposes, I’d suggest leading with the tax rebates/reductions, and particularly the across-the-board property tax rebate.
Also, is it a mistake to lock in a price per ton? Can we include a mechanism to appropriately escalate the tax over time?
1) The bill itself leads with the tax rebates; I don’t know if or how it will get summarized or otherwise written up.
2) As noted above: On increasing the tax rate: I don’t think we should try to get too far ahead of the rest of the country, and I’d also note that $30 per tonne of CO2 is a pretty strong carbon price. For comparison, the Waxman-Markey bill from 2010 wasn’t expected to hit $30 per tonne of CO2 until about 2025.
YB: Comment from Dick Burkhart:
Reading through the bill, it looks very good overall, but here are a couple of quick comments and questions.
(1) What is the “consumer protection index” (11.3)? Did you mean “consumer price index”? If so, there are several versions of this index and you need to specify which one, for example, “CPI-U, November to November, for region West”.
(2) The allocation of the 50% going to transportation is very clear – the percentage to each subaccount is specified exactly. But the allocation of the 50% going to tax rebates is as clear as mud. This needs a lot more work.
1) Good catch, this should be Consumer Price Index. This was an addition made by the Code Revisers Office (the mistake was theirs too 🙂 so I assume they know how specific to be about the CPI.
2) The 50% going to tax rebates is described in more detail in the two-pager. There are no set percentages here because this is a cascading series of allocations: whatever is needed for the Working Families Rebate goes to that, AND THEN from whatever is left there’s funds for the rebating B&O tax for manufacturers, AND THEN from whatever is left there’s money for the high-tech R&D tax credits, AND THEN from whatever is left there’s money for property tax rebates. How much goes to what depends on how much funds are needed for these programs. Our best guess (from the two-pager) is that about 6% will go to the Working Families Rebate, 7% to the B&O rebate for manufacturers, 9% to the high-tech R&D tax credit, and 28% to property tax reductions.
1. Overall, this is a well written draft. I have no major criticisms. Everything below is focused on details. Keep up the good work!
2. I think you may be offering too many tax credits with the potential result that given your pot of money they will be diluted and not mean enough, especially in terms of offsetting the effects of the tax on industry. In my opinion you should drop the property tax relief section and devote those funds to making the other tax reductions more substantial.
3. I think the new accounts you are creating, such as the “sustainable economy freight mobility” account, need more description as to what they will fund. Right now they are so general I feel like I could argue most any transportation improvement could fit into all the funds. I encourage you to define what transport improvements qualify for each pot of money and/or provide more legal definition of what each fund means, like you did with “coal,” etc.
4. Seems like you are missing a requirement that fossil fuels from WA used to generate energy in WA also have to pay the tax. Maybe just a bit more clarity on this point is needed? Dunno.
5. Your language that fossil fuels can be “shown and verified to not contribute to global warming” will be exempted seems a bit too broad. I know you don’t want to get to specific in the enabling legislation with the exact means of verification, but I feel like this vague language could be circumvented to give exemptions by unfriendly executives in Olympia and/or as back door subsidies. Not sure what you should do here, but I feel like listing possible means of verification, or a level of evidence, might reduce abuse in defining what fossil fuels do not contribute to global warming. I say this in light of arguments for “carbon neutral” biofuels grown on lands recently converted after tropical deforestation, to name one of many crazy possible examples.
Again, nice job!
2. Certainly worth considering. Some of those tax breaks (e.g., the high-tech R&D tax credit) can’t be made any bigger though (at least under current law).
3. Hm… will take another look.
4. I see your point on this; you’re looking at section 11(b), which focuses on imported electricity; I was hoping to address this in section 11(a), which deals with fossil fuels used in WA. We can certainly clarify, and it might be worth adding some sort of “intent” language at the top.
5. I’ve modified this to “shown and verified to not contribute to increasing atmospheric greenhouse gas concentrations”. I’m not sure that helps much, and you’re right that this is worth thinking about. Biofuels, though, are not subject to the tax because they’re not fossil fuels. Not sure that anything can be done about that because we don’t want to enlarge the scope too much.
YB: A comment via email:
I love where the money goes!!!! I love that u tax the CO2 emitted of energy consumed/imported I’d love it even more if it was more than $30/ton…….but that’s about $.30/gallon of gasoline if it was applied to gasoline…….which is just about where people’s driving/car-buying habits start to become affected
Thx for your good work!!!!