Initiative 732: A 'Carbon Tax Swap' To Address Climate Change

Oct 3, 2016

It’s often said that one of the most pressing issues of our time is climate change. Yet, even after years of discussion, Washington state still lacks a policy to limit the pollution that causes it. A recent clean air rule announced by the state Department of Ecology is not yet in effect and is already the subject of multiple lawsuits. So, despite its reputation as an environmentally progressive Ecotopia, the Evergreen State is left without a mechanism to reign in carbon emissions.

Voters have a chance to change that with a measure on the November ballot. Washington’s Initiative 732 would impose a state tax on carbon emissions – the first of its kind in the nation. The measure comes from a grassroots group called Carbon Washington that designed it to attract bipartisan support. Perhaps ironically, the proposal is under attack, not from big business interests, but from social justice and labor groups who say the measure fails to provide enough for the state to successfully transition to a greener future.

A Carbon Tax 'Swap'

Initiative 732 would phase in the new tax at $25 a ton to start, reaching that price at the end of its first two years in 2018. Steady increases would kick in after that, upping the rate till it reaches $100 per ton several decades from now. That would eventually give Washington one of the highest prices on carbon in the world.

And that is expected to cause energy costs to go up. A gallon of gas would cost about 25 cents more per gallon over the next two years, for example. Electricity costs would go up too. But in order to make it appeal to all kinds of people, I-732 gives all the money raised back to Washington residents and businesses.

“Yeah, so it’s a tax swap,” explains the initiative’s sponsor, Yoram Bauman. “So we’re not making government bigger; we’re not making government smaller; we’re just making the tax system fairer and more sustainable,” he said.     

'Revenue Neutral'

Bauman calls the measure ‘revenue neutral,’ because the new money coming in would be used to cut other taxes in three areas: It would lower the state sales tax by a full point for everyone. It would also virtually eliminate the business and occupation tax on manufacturers to help them remain competitive. And it would fund a program to give low-income families a tax rebate of up to $1,500 a year.

Bauman says for the vast majority of households and businesses across the state, it’s going to end up being pretty much a wash financially. He says whether people are a little bit better off or a little bit worse will depend on how much fossil fuels they consume, how much they drive, and what kind of car they drive.

“Are you driving a Toyota Prius or are you driving Hummer? And then how much other stuff do you buy [which will determine] how much you are going to benefit from the sales tax reduction,“ he said.   

And that’s the idea: to encourage people to use less carbon and cause less air pollution. You can use a tax-swap calculator developed by University of Washington to see how much it would cost you personally. That’s on the  Yes on I-732 website.

Following British Columbia's Example

The tax is modeled after the one that’s been in place since 2008 in British Columbia, where it’s widely viewed as successful. Bauman says his grassroots campaign rounded up 360,000 signatures to get the measure on the Washington ballot. 

“It’s going to make our economy better and it’s going to show a way forward on climate change and climate action for the rest of the country and for the world,” he says.   

Bauman is an environmental economist by trade. He has a PhD from the University of Washington and he gets excited about the idea that this measure is a twofer.  It will not just tackle climate change; it’s designed to  also make the state’s tax structure fairer.

“This is a huge step forward in terms of making improvements to what everybody agrees is the most regressive tax system in the nation,” Bauman said.    

He says I-732 would make Washington’s economy fairer because it would lower the state sales tax and give thousands of dollars in rebates to 460,000 low-income families. And it would get that money instead from polluters.  

Cost Concerns  

But representatives of the low-income communities it’s supposed to help aren’t buying it.

Jill Mangaliman is the executive director of Got Green, an environmental justice group with headquarters in South Seattle.
Credit Bellamy Pailthorp / knkx

“Well, it’s touted as revenue neutral; now we’re learning it’s revenue negative,” said Jill Mangaliman.

Mangaliman is executive director of Got Green, an environmental justice group led by people of color. Mangaliman is one of the main opponents of I-732 and co-wrote the argument against it in the voters’ guide. They point to an analysis from the state Office of Financial Management which projects the measure would cost Washington $797 million.

“Who’s gonna end up with the cost? It’s low-income people and people of color — working folks. And that’s a lot of money to us, and that’s a lot of services; that’s a lot of programs; that’s a lot of support for our social safety net. And so, we can’t take that risk,” Mangaliman said.    

A Red Herring?

But the state’s cost estimate is controversial. Most analysts say it’s such a small part of the state budget overall that if there is a deficit, the Legislature could easily plug the hole.  Seattle environmental think tank Sightline concluded after extensive analysis that it is as close to revenue neutral as possible for a measure of this complexity. They called the issue a "red herring."  Sightline also opted not to issue an endorsement of the measure, pro or con.

Opponents Want Direct Investments In Communities

But even if the initiative is revenue neutral, opponents say that’s not enough. A coalition of social activists including the state Labor Council and the immigrants’ rights group One America argues along with Mangaliman that I-732 would do more harm than good because it lacks targeted investments for the low-income families hardest hit by climate pollution.

“And so working families, workers, immigrants, people of color will not have the resources to transition to renewable energy — will not have the resources put into their communities who have been hit by environmental racism historically,” Mangaliman said.  

Because, Mangaliman argues, even giving a low-income family a $1,500 tax rebate won’t give them enough to really afford an electric car or solar panels. It won’t help clean up air pollution in areas where high concentrations of lower-income people live. And it won’t create a new job for someone who worked at an aluminum smelter if it reduces its work force because of higher costs.

Instead, the opponents of I-732 are pushing for a cap on carbon pollution. They say that’s a better way to ensure it would actually go down and not just make fossil fuels more expensive. And they insist the people most impacted by the pollution must have a place at the table to decide what’s most needed, otherwise institutionalized discrimination is likely to continue. 

On The Brink Of A 'Just Transition'

They say they've reached an exciting moment in which  the concerns of people of color led groups are finally being heard.

“And so we’re at this crossroads where you know a yes on I-732 can put us back, can set the bar low as far as what does a climate justice policy looks like,“ said Mangaliman.    

I met Mangaliman at the Hillman City Collaboratory in South Seattle, which has the tagline “an incubator for social change.” It’s a community space where Got Green is part of a cohort that’s developing shared principles with mainstream environmental organizations. They’re aiming to put racial justice and equity front and center in climate strategy.

A policy they do support is in development by the Alliance for Jobs and Clean Energy. Its backers include social justice advocates as well as many businesses, most of the mainstream environmental groups and Governor Jay Inslee. Their proposal would cap and price carbon and invest the revenue in community transition funds and clean technology infrastructure. They say it will be ready in 2018.

To those who think that’s too long to wait, Mangaliman says, they get that.

“I for one also am part of a community who has been impacted by climate change. My family comes from the Philippines and we’ve experienced typhoons every year,” Mangaliman said. “And so I share that urgent feeling. However, we know that I-732, Carbon Washington’s policy won’t do it because there is no direct re-investment.”  

To that, Bauman and the backers of I-732 say, they made a strategic choice to instead give money back to working families with a measure they hope will attract broad support and address climate pollution as soon as possible.  

“I think it’s unrealistic to expect one policy to do everything, you know that – we’re not going to be able to solve all social ills with one policy,” he said.    

He says voters should not allow the perfect to be the enemy of the good. And if they want direct investment in communities to help address climate change, those should be handled separately.