Editor’s Note: This op-ed originally ran in The Seattle Times print edition January 3, 2012, and online January 2, 2012.
We have a transportation problem. The governor’s Connecting Washington report identified a maintenance shortfall of almost $800 million per year over the next 10 years just to keep roads, bridges and ferries in safe working order.
We have a climate problem. Carbon concentrations in the atmosphere continue to rise, and the scientific consensus about the risks of global warming continues to build.
We can fix both problems at the same time. Economists from across the political spectrum agree that putting a price on carbon is the most effective and efficient way to reduce carbon emissions. British Columbia has proved them right: In the past few years our northern neighbor has reduced its carbon-dioxide emissions by 5 percent, and its economy has outperformed the rest of Canada.
Find this article interesting? Support more research like this with a gift!
The credit goes to the pioneering carbon tax that BC introduced in 2008. Businesses and individuals who burn fossil fuels now pay a tax of $30 per metric ton of carbon dioxide, and the provincial government uses the $1.2 billion in annual revenue to reduce existing taxes.
Bringing a similar carbon tax to Washington State could provide the funds we need to maintain our transportation infrastructure. In fact, a BC-style carbon tax would generate about $2.3 billion per year. Just half of that would be sufficient to not only fill the transportation maintenance shortfall but also restore transit funding and help provide the K-12 school-bus funding stipulated by the state supreme court.
Unfortunately, we don’t just have a transportation problem and a climate problem.
We also have a reality problem, a collective unwillingness to step up to the political plate and embrace comprehensive solutions.
Our reality problem is evident in Gov. Chris Gregoire’s budget proposal, which includes a fuel-tax increase — phased in over six years — that is sufficient to fund K-12 school-bus needs, but nothing else.
Our reality problem is evident in the recently released legislative agenda of the Association of Washington Business. This document acknowledges that current transportation funding sources are “inadequate,” boldly makes the case for investment in system maintenance, freight mobility and new capacity, and then degenerates into mumbling about paying for this with “funding strategies” that the legislature should “clearly articulate.” All that the association is able to articulate is opposition to carbon pricing and support for the supermajority requirement for tax increases.
Our reality problem is evident in the environmental community as well. Many environmentalists argue that carbon-tax revenues should be dedicated to clean-energy programs, ignoring the economic value (not to mention the political value) of funding transportation maintenance.
The truth is that we’re all in this together. The business lobby can probably kill climate legislation. Environmentalists can probably kill transportation legislation. But if we work together we can make progress on both fronts.
And that’s not all. Only half of the revenue from a BC-style carbon tax would be needed for transportation investments. The other half could, as in BC, go toward tax rebates that would improve economic competitiveness and help families and businesses adjust to the carbon tax. These could include a 100 percent rebate of the state business-and-occupation tax for manufacturing ($160 million per year), an extension of the high-tech research-and-development tax credits due to expire in 2015 ($200 million), funding of the Working Families Rebate to offset impacts on low-income households ($140 million), and an across-the-board property-tax rebate of more than $500 million.
We can fund these tax rebates by shifting to a carbon tax, and in the process make serious progress on our transportation and climate problems. If this sounds like a significant policy shift, that’s because it is. We need major changes to deal with climate change and transportation infrastructure. Welcome to reality.
This is an important topic that should be given strong consideration as we look at what we have to work with in Washington to bring ourselves to a fiscally well balanced condition.
Washington citizens and businesses should weigh in heavily in this work. That way we give the politicians popular direction, and also cover as might be needed to do the right thing.
KEY POINT: “Unfortunately, we don’t just have a transportation problem and a climate problem.
We also have a reality problem, a collective unwillingness to step up to the political plate and embrace comprehensive solutions.”
The most palatable, and perhaps only way, to convince 2/3 of the voters that this tax should be imposed is to guarantee direct return ‘dividends’ of 100% of collections in the form of dollars placed electronically in their personal accounts on a frequent interval.
I agree with Tom that, to get citizen buy-in, a tax dividend back-to-the-household may be the best option. Going for a revenue-generating tax that is applied to something like, “Transportation” looks an awful lot like a “tax on top of an existing tax.”
Meanwhile, the only revenue-generating carbon tax proposal that looks like it might see the light of day is for paying down the national deficit. Some Republicans support it.
–Forgot to mention that there is also good support for serious alternative energy R&D, using proceeds from a revenue-generating carbon tax.
To take the “reality problem” head-on, what if a legislative task force weighed the potential economic benefits and tax offsets and laid the options out clearly? The legislature could safely address its various concerns. It could look at how to apply economic best practices from BC, Ireland, and other countries with similar infrastructure and funding gaps to identify the best return on revenue. The fiscal impact would be negligible, but the reality is that it’s only a matter of time before states will have to “pull over” and talk about how to do carbon taxation right… or lose a competitive edge.
All great points, except that BC is borrowing billions to build wider roads and bridges. Part of the reality problem is that it is scary to say stop, as in stop building wider and more roads. Reality, the climate and financial crisis combined with the end of cheap oil makes this a necessity.
We need to maintain most of the existing road infrastructure, but not all of it. Some crumbling elevated freeways for example should be torn down and replaced with surface roads.
This is one of those things that should be a joke, but is in fact quite serious.
Washington already has the most regressive tax regime in the country, disproportionately taxing the working poor with a sales tax upwards of 9%, with the proceeds increasingly going to the idle rich in the form of urban transit and infrastructure improvements — the Vision 2040 plan.
Any gas tax will greatly exacerbate this situation and represents a deadweight loss to the economy as a whole.
What you want is a land value tax that encourages people to use land efficiently, resulting in the kind of dense, vertical development the gas tax is intended to stimulate, but without all the regressive deadweight losses.
SeeAssessing the Theory and Practice of Land Value Taxation
Transit and infrastructure improvements can pay for themselves through various value capture mechanisms:
Value Capture and Land Policies