Carbon TAx Environment Taxation Tim Eyman Washington State Politics

Let's use I-732 (revenue-neutral carbon tax swap) to beat I-1366 (Eyman's 2/3 super-majority blackmail)

There’s a simple way to beat Tim Eyman and his initiative I-1366. At the same time we’ll help the environment, and, optionally, raise revenue to fund schools.  And we can even do it in a revenue-neutral way, thereby making it palatable to Republicans.

By way of background, recall that if I-1366 passes — and early returns suggest that it will — one of three things must happen.

  1. The legislature must put before Washington State voters a constitutional amendment requiring a 2/3 super-majority of legislators in both the state House and the state Senate (or a majority of voters) to approve any tax increase or reduction in tax breaks; or
  2. The state sales tax must be lowered from 6.5% to 5.5%; or
  3. The state Supreme Court will have to rule that I-1366 is unconstitutional.

But I say there’s a simple solution to this problem, even if the State Supreme Court fails to rule I-1366 to be unconstitutional.

Let’s go ahead and lower the sales tax 1% but at the same raise taxes on carbon, capital gains, and/or income to make up the loss.

The tax on carbon will be similar to the effect of I-732 being (successfully) pushed by CarbonWA. One difference is that I-732’s tax would be revenue-neutral, whereas the current proposal allows, but doesn’t necessitate, revenue neutrality.

Because I-732 apparently has enough signatures to succeed, and because I-732 is an initiative to the legislature, the legislature will need to decide next year whether to impose a revenue-neutral tax on carbon. If they fail to act, a measure will appear on the ballot in 2016 to raise tax on carbon and lower the sales tax and the B&O tax in a revenue-neutral way. My point is: the legislature can use I-732 (or something similar) to neutralize I-1366.

But in addition to raising tax on carbon, we should raise taxes on capital gains and/or on income (with the first, say, $50,000 of income exempt from tax). These taxes would make Washington State’s tax system more fair and progressive. They’d lower tax on most people. After all, our state is said to have the most regressive tax system in the nation.

The voters are correct to be angry about high taxes! Most people are over-paying. What most people don’t understand is the reason their taxes are too high: because our tax system is regressive.

The net result of this proposal is that we’d satisfy the words of I-1366 — we’d lower the sales tax by 1%. But what’s great is that we’d also lower taxes on most people, help save the environment, and make our tax system more progressive.

Even if the tax shift is revenue-neutral — and that would be easier to pass in the legislature — the change will be a big win.

So, there should be no need to be afraid of I-1366 — if the legislature has the guts to do the right thing and if the people of Washington can be educated about what’s in their own self-interest.

The key is just that: educating the public. Will our political leaders show some leadership and help educate the citizens? And will we activists build an effective movement to help this happen? Until we educate the public on this issue, we will continue losing elections and initiatives.

I admit that Republicans in the legislature are unlikely to be reasonable about raising an income tax or capital gains tax. Most of them would be OK with public education failing and with homeless and sick people languishing on the streets. Conservatives will argue that the legislature mustn’t dare go against the will of the voters, who say by their votes that they do not want additional revenue. I have two answers to this.

First, if we make the change revenue-neutral, then the Republicans may agree. As CarbonWA has shown, many conservatives will agree to a revenue-neutral tax shift (for example, More and more conservative thinkers want to tax carbon. Will politicians and activists follow? and Why We Support a Revenue-Neutral Carbon Tax). In fact, many lefty groups are opposed to I-732 because of its revenue-neutrality and because it was designed in consultation with people from the conservative Washington Policy Center. (See Alliance for Jobs and Clean Energy, Carbon-tax initiative divides environmentalists, and Why I decline to sign I-732).

Second, the voters are voting against their own self-interest and need to be educated as to why the current tax system is unfair and inadequate.

But we can beat I-1366 without raising revenue.

Stop voting against your own self-interest

Republicans raised taxes on the poor and the middle class

Governor Inslee on our unfair, regressive tax system

Note: This article was previously published under the name Hell, yeah! Let’s lower the sales tax 1% — and raise taxes on carbon, capital gains and/or income.



2 Replies to “Let's use I-732 (revenue-neutral carbon tax swap) to beat I-1366 (Eyman's 2/3 super-majority blackmail)

  1. (In response to A progressive Legislature, not Eyman’s 1366, can fix Washington’s regressive tax system)

    Good analysis about the differences between initiatives to the people and initiatives to the legislature!

    The text of I-732 says “There is levied and collected a tax equal to six and five-tenths percent, decreasing to six percent beginning July 1, 2017, and to five and five-tenths percent beginning July 1, 2018,”

    If the legislature approves this initiative I-732, which sales tax would take precedence? I-732 or I-1366?

    Perhaps I-1366 would apply from April 16, 2016 til I-732 takes effect on July 1, 2017.

    But the two initiatives directly contradict each other on what and when sales taxes will apply. So maybe the courts would have to decide.

    But the legislature could, effectively, co-opt both initiatives by passing its own bill that lowers the sales tax by 1% (thus satisfying I-1366) and making up for the lost revenue by raising tax on carbon, capital gains, and/or income. You are correct that Republicans are unlikely to go along with taxes on capital gains or income. They might agree on a revenue-neutral tax swap between sales and carbon. But could that go into effect by April 16, 2016? Maybe somewhat later.

    You are apparently correct that the legislature can’t directly use I-732 to counteract I-1366, because the starting dates don’t match. But because of the conflict in starting dates and sales tax amounts, the courts could decide.

    As you say, the best solution now is for the State Supreme Court to rule that I-1366 is unconstitutional. If it fails to do that, or if the U.S. Supreme Court over-rules the State Supreme Court, then is our only alternative to wait til we have a progressive legislature? That won’t happen for 13 months at the earliest.

    Some sort of swap between sales tax and, say, carbon still seems feasible, if politically difficult.

    The Secretary of State’s election website says “The Legislature can approve an alternative to the proposed initiative, in which case both the original proposal and the Legislature’s alternative must be placed on the ballot at the next state general election.” This is one path to using a bill similar to I-1732 to overcome I-1366.

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