Governor Inslee’s complex cap and trade proposal was designed to “make polluters pay.” The Governor said he’s hopeful that businesses covered under the plan would not pass their cost increases along to consumers. However, his own economists estimate that the tax plan will increase gas prices by $0.12 immediately and by $0.41 above projections over time. He’ll also raise the price of natural gas by 22 percent above projections over time.
This is the definition of a regressive tax. Everyone has to pay for electricity and gas. Those who make less money and are on fixed incomes pay disproportionately more for their bills than those Washingtonians with a higher income. In fact, Mark Baldwin, the assistant director for forecasting at the Office of Financial Management, told the House Appropriations Committee on March 12th that the plan was “somewhat regressive,” arguing further that “It’s well-known that lower-income households spend a higher percentage of their income on energy and other things which are more price inelastic.”
The Governor recognizes this major issue with his proposal, which is why he’s promising $196 million of the revenue from the plan for a “Working Families Tax Rebate Program.” Even though these families would have to pay more each month for bills and every time they fill up their tanks, the Governor’s solution is to give them a tax credit at the end of the year. In addition, there’s no guarantee that this program would be funded every year or that each lower-income person would qualify.
A carbon cap-and-trade tax plan will hit Washingtonians who can least afford it: the poor, elderly and those on fixed incomes. There’s a better solution to reducing carbon emissions than sticking it to the families who can least afford it.