Its Time to Make Our Taxes Smarter

Sometimes, politics obscures the most obvious solutions to
many problems. Replacing some of Washington states most unpopular taxes with a
carbon tax is one such solution.

With oil prices down and huge reserves of cheap natural gas
increasingly available, we have the opportunity today to make a relatively
painless transition toward an economy less dependent on risky,
pollution-generating oil and dirty coal to one that operates with a cleaner,
more reliable and, ultimately, less expensive combination of natural gas and
renewable energy.

The cap-and-trade system proposed by the Obama administration
as well as by the Western Climate Initiative, a group of western states and
provinces of which Washington state is a member, is one approach to making that
same transition. But its a complex system that is susceptible to being gamed.
And it could take years to put into place.

A carbon tax would be far simpler. The new tax would be
placed on all gasoline, natural gas and other sources of carbon emissions based
on the emissions those fuels produce, perhaps the equivalent of 15-20 cents on
a gallon of gasoline. But all revenues would be used to reduce real estate,
B&O and sales taxes. The carbon tax would be easy to administer and hard to
evade. It would create economic incentives for entrepreneurs to pursue clean
renewable fuels, help reduce congestion and pollution by encouraging more
carpooling and the use of public transportation, and encourage businesses to
pursue energy saving measures more aggressively. Lower B&O taxes would also
help attract more companies to the state, particularly those that want to be
able to make growth driven by green energy part of their brand.

The carbon tax has supporters across the political spectrum.
Steve Reynolds, CEO of Puget Sound Energy, recommended it in an interview with Seattle
Business Magazine, and it has the
endorsement of both the conservative Washington Policy Center and the
environmental Sightline Institute think tanks. British Columbia liked it so
much that it implemented the tax two years ago.

So why doesnt the concept get traction here? Conservative
politicians dont like anything that has the word tax in it. But this measure
is revenue-neutral. Tax revenues raised in one area are offset by lowering
other taxes. Liberals say the tax is regressive. Then we can follow British
Columbias lead and use a small portion of the revenue, perhaps 10 percent, to
provide a sales tax rebate to low-income families. Liberals also believe a
cap-and-trade system has a better chance of passing. But thats no reason to
oppose a carbon tax. Indeed, the Western Climate Initiative allows British
Columbia to meet some obligations through its existing carbon tax. Yoram
Bauman, a lecturer on economics in the UWs Program on the Environment, thinks
that if the legislature doesnt move on the idea then there should be a
statewide initiative. We arent big fans of legislation by initiative. But the
case for a carbon tax is too strong to ignore.

Leslie D. Helm, Editor