11.5.2018

There Is No Carbon Tax In The U.S., But The Midterms Could Change That

There is no carbon tax anywhere in the United States, but that could change this week. While Washington state is one of nine that do not tax income, this week Evergreen State voters will decide whether Washington becomes the one and only state to impose a regressive carbon tax.

Initiative 1631, one of the more than 150 statewide measures to be voted on in 38 states this week, marks the third attempt over the past two years to enact a carbon tax in Washington. Initiative 1631 levies a tax of $15 per metric ton of carbon starting in 2020, with the rate increasing $2 every year until the state meets a 2035 emissions reduction target that calls for cutting the state’s carbon emissions from 2018 levels by a minimum of twenty million metric tons, and is on track to meet a 2050 target that calls for a reduction of of fifty million metric tons. In 2016, a carbon tax initiative was rejected by 59% of voters. The second attempt was defeated earlier this year, when a carbon tax bill backed by Governor Jay Inslee (D) failed in the state legislature. With Initiative 1631, carbon tax supporters once again take the matter to voters, hoping the third time is the charm for getting this regressive tax hike approved. Unlike the 2016 measure rejected by Washington voters, which was coupled with offsetting tax cuts so that it would not raise taxes on net, Initiative 1631 is designed to impose a sizable net tax increase, without corresponding tax relief to mitigate the harm caused by the carbon tax. Why are green groups opposing a carbon tax? That was a question asked many times two years ago. The fact that the 2016 carbon tax measure did not impose a large net tax hike, as Initiative 1631 would do now, was one of the top reasons why environmental advocacy organizations opposed it two years ago.  Washington’s 2016 carbon tax measure, though it failed, was instructive because it made clear where the priorities of many green groups stand. It seems, based on the response to the 2016 measure from the Sierra Club and other green groups, that growing government and increasing spending is more important than reducing emissions for some of them. In addition to raising utility bills and other energy costs for households and businesses across Washington, Initiative 1631 would funnel a portion of carbon tax revenue to a slush fund for politicians and politically active organizations to spend with little accountability. Ronald Bailey, science correspondent for Reason Magazine, explains how Initiative 1631 creates a multi-million dollar taxpayer slush fund with scant accountability:
Unlike the earlier proposal, this new initiative has the backing of most environmental lobbying groups. What’s different? Instead of going back into the pocketbooks of citizens, this time the funds will be directed toward projects chosen by a new 15-member board of political appointees, over which environmental activist groups will exercise outsized influence. Seventy% of the revenue is earmarked for renewable energy investment and public transit, 25% for water and forests, and 5% must go to communities both impacted by fossil fuels and those looking to transition away from them. It is estimated that the fee will generate $2.2 billion in revenues during its first five years.”
Using the projections of carbon tax proponents, Bailey finds that the end result of Initiative 1631’s passage in Washington “would amount to reduction of just under 1 million tons of carbon dioxide annually; in other words, a negligible reduction with respect to the problem that it purports to help solve.” Given the high costs imposed by carbon tax, coupled with the negligible projected benefits, it’s not surprising that carbon taxes have proven to be both political and economic losers, not just in the U.S. but also around the globe.
American voters can look to the examples of other nations that introduced a carbon tax and see the economic and political harm that resulted,” Congressman Steve Scalise (R-La.), the U.S. House Majority Whip, and Grover Norquist, president of Americans for Tax Reform, write in today’s Washington Examiner. “Following Australia’s introduction of a national carbon tax in 2012, the cost of electricity rose by 15% in the first year and unemployment jumped by more than 10%. The revolt against the carbon tax cost two prime ministers their jobs, and the carbon tax was repealed in 2014.”
As it would happen, carbon emissions from the entire U.S. power sector have declined by 28% over the last decade, according to a new Energy Information Administration report. This decade-long decline in U.S. power sector carbon emissions has occurred without any state imposing a carbon tax, and without the sort of regulations and taxes that would be required to meet the requirements of the Paris Agreement. A big reason why many people were happy with President Trump’s June 2017 decision to withdraw from the Paris Agreement is that a carbon tax was being discussed as a possible mechanism for meeting the Agreement’s emissions reduction mandate. Based on the political landscape at the federal level, carbon tax advocates have taken their efforts to state capitals, pushing state legislation, thus far unsuccessfully, in Vermont, Rhode Island, Maryland, New York, Hawaii, and Maine. Despite unified Democratic-control of many of those state governments, none of those carbon tax bills has been approved. Vermont Governor Phil Scott’s (R) opposition to a state carbon tax is a key reason why environmental activists have been unable to pass a carbon tax in Bernie Sanders’ home state, one of the nation’s most progressive. “Imposing a carbon tax on our workforce would be detrimental for Vermonters and our state’s economy,” Governor Scott wrote on his Facebook page. “As I’ve said many times before, I will veto a carbon tax if it comes to my desk because we cannot make Vermont more affordable by making it less affordable.” Thus far, carbon tax proponents have been unable to enact their preferred policy, even in some of the most left-leaning states. But check back later this week, as that may change depending on the outcome of Initiative 1631.

I am Vice President of State Affairs at Americans for Tax Reform, a Washington-based advocacy and policy research organization founded by Grover Norquist in 1985 at the request of President Ronald Reagan. My writing and commentary have been published in The Economist, Reuter…

Patrick Gleason is vice president of state affairs at Americans for Tax Reform, and a senior fellow at the Beacon Center of Tennessee.
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