Carbon Tax Could Make a Comeback in Washington State

On December 13, Washington Governor Jay Inslee (D) unveiled a sweeping plan to pay for statewide K-12 education, funded by more than $4 billion in proposed new taxes in the upcoming two-year budget.

One of the key parts of his plan would revive a carbon tax, which voters rejected just last month, according to a report by The Seattle Times.

Initiative 32 garnered just 42 percent of the vote in November. Under the terms of Inslee’s new proposal, the Evergreen State would:

  • Increase the business-and-occupation tax on services provided by accountants, attorneys, real estate agents and others from 1.5 percent to 2.5 percent, raising $2.3 billion in the 2017-2019 budgets.
  • Enact a carbon tax that would charge the state’s emitters $25 per metric ton starting in 2018, raising $2 billion.
  • Establish a 7.9 percent tax on capital gains earnings above $25,000 for individuals, and $50,000 for joint filers, to raise about $821 million in fiscal year 2019; and
  • Roll back several tax exemptions, including one on bottled water and another that benefits oil refineries.

In his announcement, Inslee called the plan “a big, bold thing that we’re proposing here,” noting that, “We’re the state that built the Grand Coulee Dam, we’re the state that built the Boeing 747, and we’re the state that can fully fund basic education after 30 years.”

Inslee has surfaced the first major plan in what’s expected to be a tough slog of negotiations in the legislative session that starts in January, according to the local news outlet. House Democrats and Senate Republicans will release their own budget plans early next year.

Indeed, on the same day on which the Governor announced his proposal, Republicans began firing back almost immediately. Inslee’s plan “looks more like another attempt to impose a new carbon tax and a new tax on income, and less like a way to thoughtfully address the K-12 funding question,” Senator Ann River (R-La Center), a member of the State Legislature’s Education Funding Task Force, said in a statement.

Inslee’s proposed tax rate would be higher than nearby Idaho’s 7.4 percent; but lower than Oregon’s 9.9 percent and California’s 13.3 percent, according to the Tax Foundation, a nonpartisan think tank that advocates for lower taxes.

Those states, like others that tax capital gains, also have state income taxes. Washington is one of seven states that do not impose an income tax.

Inslee’s carbon proposal would set a $25-per-ton tax on carbon emissions, raising about $2 billion in the 2018-19 budget. About $1 billion would go toward education and the rest to

The state must enact a full education funding plan by September 1, 2018, with that plan approved by the end of the 2017 legislative session.

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