January 6, 2016

Washington State Likely to Get a Carbon Tax on 2016 Ballot



On December 30, in Olympia, Washington, Seattle resident Yoram Bauman turned in over 350,000 signatures in support of I-732, a Washington state ballot initiative for a revenue-neutral, state-level carbon tax.

Yoram Bauman is the founder of CarbonWA, a tiny, volunteer-driven group striving to get a carbon tax initiative on the Washington State ballot for the November 2016 election. Yoram Bauman has a PhD in Economics from the University of Washington. Rather than take up life as an economics professor, he opted to make a living as a stand-up comedian. So you might typecast him as a smart, funny, but unserious comic. The first two are accurate, but you would be way off on the third. Yoram is serious about economic growth, and serious about climate change.

CarbonWA has collected over 350,000 signatures, which will likely produce more than the 246,372 valid signatures needed to qualify their carbon tax proposal to appear on the 2016 ballot. The CarbonWA proposal, I-732, that will hopefully reach Washington State voters in November, will include:

  • a $25 per ton tax to fossil fuels, ramping up 3.5% per year up to $100,
  • a one cent reduction in the state’s sales tax rate (from 6.5% to 5.5%),
  • an annual credit of up to $1500 for low income households,
  • a reduction of the state Business and Occupation tax on manufacturing to virtually zero.

The tax is expected to be revenue-neutral, which means that on net this should not cost the state, nor produce added revenues (very much). That is a matter of economic modeling, of course, and is not precise, but the projections are realistic and the revenue swap will be close. If anything, I-732 will likely produce net revenues as long as gasoline prices remain so low, as people will drive more and pay more in carbon taxes. I-732 has the type of sensible time adjustments that seem to elude Congress, like inflation indexing and a phasing in of the tax reductions and credits. There is something in this for everybody: a carbon tax for environmentalists, reductions in sales taxes and business taxes for those concerned with economic activity, and a tax credit for low-income households who worry about a carbon tax being regressive. The net effect of this initiative will be to reduce the carbon footprint of the state as a whole, and likely stimulate economic activity due to the tax reductions. That latter conclusion is subject to debate over the assumptions one uses, but if there is anyone who wants to debate them, by all means, let’s debate.

Environmental organizations in Washington State and nationally have kept their distance from CarbonWA and their proposal. There are organizations that remain suspicious of a carbon tax because it is not their idea, and is not punitive enough for their liking. And rather than use carbon tax revenues to help keep up economic activity, they would rather see it put to environmentally-oriented uses, like funding renewable energy. That is defensible, but not as economically sound. You would think, conversely, that the tax-offsetting CarbonWA proposal would pick up the support of business interests in Washington State, with the virtual elimination of the B&O tax for manufacturing; but support has been tepid in part because they remain stuck on the phrase “carbon tax.” Washington state legislators are not so different from other elected officials, as they remain fearful of carbon taxes, even if is likely to be economic stimulus. They just don’t believe it.

With that backdrop, environmental organizations approached the CarbonWA board in December, less than a month from the deadline for turning in signatures to the Washington Secretary of State, and with over 300,000 signatures already collected by CarbonWA volunteers. They had a proposal to change the ballot initiative: forget about the tax reductions, and use the carbon tax proceeds for funding renewable energy. It did not look like it was going to do much for business or Washington state consumers. What the alliance of environmental and justice organizations (the “Alliance”) said they could offer was a ballot that polled better, and had a better chance of passing, in their view.

CarbonWA could have been forgiven if their reaction to the latecoming proposal was to tightly clutch their hard-earned signatures, and dismiss the Alliance as Johnny-come-latelies. But the CarbonWA Executive Board took the proposal for collaboration very, very seriously, taking active part in the agreed-upon polling exercise. And the results did, in fact, mildly bear out the Alliance claim that their ideas polled slightly better. In sudden doubt and faced with a deadline, the CarbonWA board decided to hold a conference call to take input from the hundreds of volunteers that helped gather the 350,000 some-odd signatures. I was not one of them, but I was in on the conference call.

What I heard on that conference call was an unusual show of citizen democracy. Not only is the CarbonWA Board to be credited with working hard with the Alliance, but their instinct – to go back to the volunteers to talk it over with them – is an example of inclusive leadership. They were rewarded with a thoughtful and engaged conference call. The comments I heard from the hundreds of volunteers phoning in showed an active wrestling with the serious policy issues raised by their own I-732, and the possibility of allying with larger, better-funded environmental organizations, that might be better at getting a ballot across the finish line.

In the era of Trump, how surprised would you be to hear volunteers wax philosophical about their own efforts in the grander scheme of climate policy? Several volunteers lamented what would be the torching of the signatures they had worked hard to obtain, but unselfishly supported allying with the Alliance if it meant a better chance at getting a carbon tax approved by voters. Several others countered with the doubt that if the Alliance hadn’t done anything yet, they were unlikely to do anything in 2016. After a fair bit of agonizing, the CarbonWA board decided to turn in the signatures.

I favored CarbonWA turning in the signatures. I could see the merits of allying with the Alliance, but the downsides seemed more problematic. Once CarbonWA burned those signatures, there would be little guarantee that something could get put together for 2016. I-732 is the bird in the bush. And the concern that the Alliance hadn’t done any of its own grassroots organizing, and had yet to coalesce around something concrete, as the CarbonWA volunteers did, seemed important.

But perhaps most importantly, the CarbonWA proposal is simply the best idea. I-732 is only in part a climate initiative, and the most important part. But it is also an economic initiative, and that might be the more politically important part. This would be the first real carbon tax in the United States, and its economic success could bring more states online sooner, and pave the way for real climate policy, sooner. I remain skeptical that any putative polling superiority for an Alliance alternative to I-732 would be lasting. Call me naïve, but I remain hopeful that the better ballot initiative would do better on November 8th.

Most ballot initiatives are junk. They tend to be written and funded by political hacks and special interest groups. California gave us Prop 187, the “Save Our State” initiative that would have excluded undocumented immigrants from health care, education, and indoor plumbing. California also gave us Proposition 13, which effectively froze California property taxes and produced decades of pathologies. But I-732 is not Prop 13. This is a serious, thoughtful, and economically viable climate initiative. Gregory Mankiw, the prominent Harvard Economics professor who served as President George W. Bush’s Chief Economic Advisor, has called Yoram “my friend,” and endorses the general thrust of I-732.

Yoram Bauman has written three books, all of them about economics or climate change. As testimony for the Cartoon Introduction to Climate Change, Yale professor William Nordhaus, another blue-blooded economist and recent President of the American Economic Association, wrote, “Who says that sophistication is only in equations?” And climate pioneer and activist James Hansen wrote (strange bedfellows, by the way): “climate is no laughing matter – but it beats crying.”

Better even still than a laugh — how about a cheer for CarbonWA?