Don C. Brunell: State Carbon Tax Would be Harmful

A major hurdle for lawmakers in Olympia working to finish the next two-year state budget and adjourn is the so-called “carbon tax.”

However, Gov. Jay Inslee wants a first-ever levy on CO2 emissions. While it targets coal and natural gas power plants and manufacturing facilities, everyone will pay more.

His proposal is part of a grand plan to raise $5.5 billion in higher taxes. That scheme also includes imposing a new tax on investor’s income and increases existing business and occupation (B&O) tax rates on services.

Higher taxes are troublesome for Washington businesses which already pay 58 percent of state and local taxes. According to the Council on State Taxation (COST), business owners paid $7,600 per employee in state and local taxes in 2015 – the sixth highest per employee tax burden in the country. The national average is $5,800.

Initially, the carbon tariff would be $15 per metric ton, but it would ramp up annually and be adjusted for inflation. Some of the money raised would go to help people who lose their jobs because of the new tax, but unlike I-732, which voters soundly rejected last November, there would be no offsetting reductions of existing taxes.

Proponents of I-732 sold the initiative as revenue neutral. In exchange for a $25 per ton tax with annual escalators, the state sales tax would have dropped from 6.5 to 5.5 percent. It would also enable lawmakers to eliminate the B&O tax on manufacturers – the hardest hit business sector.

Even with those concessions, the Office of Financial Management in Olympia estimated an $800 million drop in state revenue collections. Meanwhile, the average family would pay more than $448 per year in higher gas taxes and heating and electric bills.

If the carbon tax is enacted to club manufacturers and utilities into compliance, it is unnecessary.

Association of Washington Business President Kris Johnson wrote last October – while Washington’s population has increased 43 percent since 1990 and the economy has grown by 260 percent, carbon emissions have dropped by 18 percent, according to EPA. So the trend is going in the right direction without a carbon tax.

A state “ONLY” tax on carbon emissions places our manufacturers at a significant competitive disadvantage. Particularly hard-hit are rural counties where unemployment remains stubbornly high. Many of those communities have pulp and paper mills, refineries and food processing plants which provide good paying jobs with benefits.

If there is to be a carbon tax, it should be uniform and enacted by Congress. A national tax would even the playing field and not give South Carolina, for example, a competitive advantage over Washington.

Our economy is finally trending upward. Our state’s Economic and Revenue Forecast Council recently projected we will collect $571 million more than originally expected through the middle of 2019.

There is another way to balance the budget with current taxes and add $3.75 billion to our public schools satisfying Washington’s Supreme Court mandate on adequate funding schools. It also involves restructuring the way public education is offered and deserves an opportunity to work.

The state senate’s budget increases spending by $4.8 billion over the current biennium without Inslee’s higher taxes. The total budget would be $43.3 billion for 2017-19.

Our state is already an international environmental leader in reducing greenhouse gases caused by human activity. That is something for every Washingtonian to celebrate.

Washington is making solid progress and we have the foundation on which researchers and innovative entrepreneurs are encouraged to make future improvements to our environment. So, why put our state’s economy, jobs and tax collections at risk?

(Don C. Brunell is a business analyst, writer and columnist. He retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at [email protected].)