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Washington State governor proposes $1B carbon tax

Washington Gov. Jay Inslee proposed a $25 per metric ton tax on carbon emissions, but the chances of passing the legislation in a politically divided legislature are slim, especially after the recent defeat of a voter initiative to impose a carbon tax.

The governor's budget proposal calls for the tax to raise nearly $1 billion per year. By law, the governor must propose a biennial budget in December, the month before the legislature convenes in regular session. Washington enacts budgets on a two-year cycle, beginning July 1 of each odd-numbered year. The budget approved for the 2017-19 biennium remains in effect from July 1, 2017, through June 30, 2019.

Inslee is proposing a new tax on carbon emissions associated with the production and consumption of fossil fuels. The carbon tax would take effect in fiscal year 2018, generating about $1.9 billion in the next biennium. About half the revenue generated by the carbon tax would be directed to elementary and secondary schools.

Some of the rest would be invested in clean energy and transportation projects, programs to lower consumer fuel bills and projects to reduce greenhouse gas emissions. Revenue also would support major projects to build water infrastructure and for forest fire prevention. Some funds would offset taxes to businesses and low-income households vulnerable to increased energy costs.

The state's voters in November rejected a ballot measure, known as Initiative 732, that would have taxed the use of fossil fuels and fossil fuel-generated electricity. Social justice groups, expressing doubts about equality in the "trickle down" nature of proposals for returning benefits to the poor, vigorously opposed it. Some environmental groups opposed the initiative because much of the money would have gone for corporate tax breaks instead of being directed at climate solutions.

Now Inslee, a Democrat, is seeking to use the carbon tax in large measure to help close a projected multi-billion dollar state revenue shortfall. The proposal is likely to meet substantial opposition in the legislature, even though the House and Senate Democrats hold slim majorities. The governor's proposal overall to increase state spending by $8.2 billion will require a large amount of cooperation on both sides of the aisle. The governor is required by law to propose a budget that balances within existing revenues, according to the Washington Research Council.

The Association of Washington Business, Washington state's largest business association, said Inslee's proposal for more than $4 billion in new taxes threatens to undermine the state's uneven economic recovery. The association expressed opposition to raising taxes and cutting tax incentives.

"The carbon tax proposal in the governor's plan would be a second blow to the state's manufacturers, a sector that supports good-paying family-wage jobs, but is already dealing with the impacts of the governor's recently unveiled carbon rule," the association said, referring to Inslee's 2015 order directing the state Department of Ecology to develop a regulatory cap on carbon emissions for large sources.