Tax Foundation and AWB both warn of economic risks created by I-732 carbon tax

The Tax Foundation has released an analysis of the I-732 carbon tax. (We’ve written about other studies of the tax by the Washington Research Council and the state budget office.) In measured words, the Tax Foundation concludes,

Initiative 732 is an ambitious proposal, and in many respects a balanced one, but it also carries significant risks, both in terms of revenue certainty and broader economic effects.

Risks matter. And, as TF writes, the risks associated with I-732 are significant.

Nevertheless, I-732 represents an experiment with considerable risk, not only in terms of revenue projections but also in its broader economic effects. British Columbia’s carbon tax notwithstanding, a state with Washington’s diversified economy to adopt a carbon tax on its own is uncharted territory. Proponents hope that carbon emissions will decline as the tax encourages manufacturers and consumers to become more efficient or curtail consumption. They would not, presumably, regard it as a victory if carbon emissions plummeted in Washington merely because manufacturing jobs migrated to other states.

Kris Johnson, president of the Association of Washington Business, writes in the Puget Sound Business Journal, that Washington businesses have already made substantial gains in reducing carbon emissions.

Washington’s population has increased 43 percent since 1990 and the economy has grown 260 percent, yet carbon emissions are down 18 percent, according to the U.S. Environmental Protection Agency.

And he points out the risks are not just to the economy, but extend to education funding and to low-income families.

A 25-cent increase in the cost of gasoline, and higher electricity and natural gas prices — all without any guarantee of lowering carbon emissions. For families living on the financial bubble, this may mean choosing between heating their home or buying gas to get to work.

The sales tax reduction included with the initiative won’t provide much relief.

Unfortunately, if you’re already living paycheck to paycheck, you’re likely not buying a flat screen TV to get the sales tax break, or as the initiative sponsor suggests, a Toyota Prius to lower your fuel bill. You’re buying food and fuel and paying your electricity bill — which will increase by $448 per year under I-732 – none of which will give you the benefit of the sales tax break.


Aside from the financial hit to families and employers, the non-partisan Office of Financial Management has estimated a loss to the state budget of $800 million, a significant figure when additional funding for schools, mental health services and programs that protect our most vulnerable is required to satisfy state Supreme Court rulings.

As we wrote earlier, major editorial boards, environmental groups, labor unions, and employer organizations oppose the initiative.