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Defeat of the Carbon Tax: As Washington Increasingly Mimics the Partisan Gridlock of the “other Washington,” it Risks Losing Progressive Action in the Name of Progressive Principles

Posted in Clean Energy, Climate Change, Emerging Policy, Energy Policy, Fuel Efficiency, Renewable Energy, Sustainability, Tax, Uncategorized

We all know the federal government is hamstrung by partisan gridlock.  Where once lawmakers recognized that passing legislation required that both parties end up being able to claim success, that no one got everything they wanted, and that progress was never perfect, today there seem to be new rules holding forth:  “I will only ‘compromise’ with you if I get everything I wanted, and I get all the credit.”  “If you have to eat some crow, that makes me look better.”  “I don’t need your help enough to be willing to let you take the credit for what we accomplish.”

For a long time, Washington State seemed to understand the benefit of the old rules.  And certainly there was a time when in Washington State, the term “progressive Republican” was not an oxymoron.  Dan Evans was the poster child for progressive Republicans, but even some pretty conservative politicians were willing to work on the same issues as Democrats; both parties believed in the role of government to address the fundamental issues of society.  The parties differed in their preference for lower taxes and less government, but they were willing to work across the aisle to pass acts like Washington’s Growth Management Act, the State Environmental Policy Act, the Washington Forest Practices Act, and many other pieces of environmental legislation.

Increasingly, however, Washington State politicians seem to be copying their federal counterparts – insisting on their way or no way.  And the consequence is that when nothing can get done that both parties can agree on, nothing much gets done.  The recent defeat of Initiative 1631, the most recent carbon tax initiative, is a case in point.  It follows the defeat in 2016 of Initiative 732, and several legislative sessions when the legislature refused to pass a carbon tax.

Plenty of press has followed the most recent defeat, saying it shows that Washington will never pass a tax, or that Washington will not commit to any truly significant climate action.  But at least consider that it may be an example of how things that could be done on a bipartisan basis will not be done at all in the winner-take-all framework of our current partisanship.

Initiative 732 was the brainchild of then-University of Washington Professor of Economics, Yoram Bauman.  Bauman’s premise was simple.

First, there are two principal ways that governments have approached carbon emission reduction: cap and trade systems and carbon taxes.  British Columbia adopted a carbon tax several years ago; California has adopted a cap and trade system.  Both systems can work, but the carbon tax is vastly simpler, and from an economist’s perspective, more efficient.  Less money is spent on consultants and lawyers and government bureaucracy.

Second, Bauman believed, and polls suggest, that a fair number of conservatives believe climate change is real and serious and believe something should be done about it.  But they are skeptical of government solutions.  They believe that smaller government is better and taxes are too high.  Those beliefs constrain what they are willing to support.  They also correctly believe that the cost of carbon reduction falls the hardest on people least able to adapt – the folks who cannot buy a new fuel-efficient car and do not have the capital to replace the windows in their home, or any way to force their landlord to winterize their apartment.  It falls hardest in rural areas, where transit is not available or not an option for commuting to work.

Third, Washington has an indisputably regressive tax system – it relies very heavily on sales taxes, which burden people who must spend all of their income on necessities far more than it burdens people who have money to invest and save.  Washington’s B&O tax hurts the competitiveness of Washington business relative to business in other states.  It falls hardest on small businesses.

With those three starting premises, Bauman drafted Initiative 732 to impose a tax on carbon, but use the revenues to reduce the sales tax and the B&O tax.  So, people who would be burdened by an increase in the cost of gasoline and heating oil, would see their cost of consumer goods go down.  Businesses that would need to invest in fuel efficiency, would see their B&O tax go down.  The carbon tax is what economists think is the best way to address carbon reduction.  It would respect conservatives’ desire for smaller government solutions.  And if not “tax neutral” for everyone, it was basically tax-neutral as a whole.  I-732 was promoted as a win for the liberal desire for real climate progress, and a win for small government solutions.  If the liberal Central Puget Sound delivered the votes for climate action, the rest of Washington could be persuaded to give it enough votes to pass.

But, here the “we have to win everything” mentality of today’s partisanship came in.  Governor Inslee and liberal groups like the Sierra Club opposed I-732 because it was revenue neutral.  They wanted the tax to go to the general fund to expand state revenues.  They argued (and there was truth to their argument) that the State needed more revenue for public schools, and a host of other issues.  They could not let a new revenue stream go untapped.  And because of the opposition of the governor and liberal interest groups, although I-732 did as well as hoped in the red parts of Washington, it did not garner enough votes in liberal Central Puget Sound to pass.  In 2016 Senator Patty Murray carried King County by 455,000 votes; I-732 carried King County, the heart of the environmental movement in Washington, and where overwhelming majorities have driven statewide success on other liberal initiatives, by 28,000 votes.  With that sort of anemic response in its natural stronghold, it lost statewide by 574,000 votes.

So, then we have I-1631.  By the time it came up, the Legislature had found a solution for the public schools, so that was no longer the place where new revenue had to go.  Instead, I-1631 would have given the revenue to an appointed board, which would have decided how to invest it in new carbon reduction technology.  The concept was fine – undoubtedly there would be a benefit to investing more money in carbon reduction technology.  (Unless it was frittered away through boondoggles or fraud – but maybe it would have been well spent.  The “no on I-1631” lobby was brutal in suggesting that citizens should not be giving an unelected board that much discretionary money.)  Regardless, the carbon tax was to be a new source of revenue, taken in the end from Washington consumers, and used to increase government.  Which meant that its burden fell hardest on the people least able to absorb the blow, and they got nothing in return, except a hope that somehow their pain would be later generations’ gain.  And I-1631 failed by 405,000 votes.  In spite of the governor’s and leading environmental groups’ strong support, it came only 3 percentage points closer to passing.

What is the takeaway?  I would submit that it is a cautionary tale.  Climate change is an issue that desperately needs to be addressed.  It is not the only one.  But Washington politicians would do well in attempting to grapple with dire issues to remember how bipartisanship used to work.  They should strive for solutions that respect the passions on both sides of the aisle.  They should be willing to take most of a loaf, rather than getting nothing other than rights to claim the moral high ground.  Democratic leaders like the Governor, and environmental interest groups, need to be willing to put heart and soul into measures that can attract the middle as well as the most liberal end of the electorate.  Today, it is hard to imagine we would not have been better off with a carbon tax in place, even if all the revenue did was lower the sales and B&O tax, than with nothing in place designed to reduce carbon emissions in Washington.