Imagine a tax proposal so unusual that it turns traditional political alliances inside out: a tax hike on fossil fuels that Democrats, unions, and green groups oppose, while the Western States Petroleum Association remains neutral—even though the levy is aimed at its products! Such a proposal, you’d think, could only be the product of a diabolical mind. Sort of: the plan’s author, Yoram Bauman, is known as the “stand-up economist.” When he’s not teaching at the University of Washington, Bauman travels the country doing economics-based comedy. An example: “Microeconomists are economists who are wrong about specific things. Macroeconomists are economists who are wrong about things in general.”
Still, Bauman is deadly serious (sort of) about Washington State Initiative 732, which will appear on the ballot this November, thanks to the efforts of a group that he helped assemble. If it passes, it will impose a carbon tax on fossil fuels in Washington but reduce general taxes by about the same amount. It’s designed to cut consumption of carbon-based fuels in a revenue-neutral way without putting any additional financial burden on state residents. Behind the proposal is Bauman’s notion that our current approach to taxation doesn’t make sense. We tax things that we want more of, like profits and income, and wind up getting less of those things because taxation tends to make them scarcer. Instead, we should tax things that we want less of—and, for Bauman, that means taxing fossil fuels to reduce greenhouse emissions.
From a traditional economics perspective, Initiative 732 isn’t outrageous at all. The early-twentieth-century English economist Arthur Pigou argued that the actions of individuals and firms sometimes impose costs on society—such as the sale of alcoholic beverages, which required employing more cops to deal with the resultant disorder. That cost, in Pigou’s mind, justifies an extra government levy on alcohol, an example of what’s come to be known as a Pigovian tax.
It’s from a political perspective that Bauman’s proposal is causing a stir, exposing previously unknown fault lines. Most assume that the environment is the primary concern of groups like the Sierra Club, but many green advocates oppose the Bauman tax because of its revenue-neutral character. Groups such as the progressive-minded Washington Environmental Council are less enthusiastic about a tax that doesn’t also grow government. The “climate-justice” organization OneAmerica is backing an alternative tax that would generate new state revenues. The group’s director says that its tax proposal, which is not on the ballot this year, would “take on entrenched fossil-fuel interests,” which Initiative 732 apparently doesn’t do.
The Washington State Democratic Party also opposes the tax, in part because of what it decries as “ridiculous commentary” by Bauman. Earlier this year, in a message to environmentalists, Bauman argued that “the path to climate action is through the Republican Party.” He believes that the GOP’s skepticism on climate change is surmountable. “The same cannot be said of the challenges on the left: an unyielding desire to tie everything to bigger government, and a willingness to use race and class as political weapons in order to pursue that desire,” he said. In fact, the one tax already in effect that most resembles Initiative 732 is an emissions levy passed in British Columbia in 2008 not by the Left but by a center-right government.
Some business groups also oppose the measure, in part because any tax package creates winners and losers. This tax will raise the cost of gasoline and electricity but cut the sales tax and some corporate taxes. Figuring out how that will affect the bottom line is a complex calculation, and some businesses would rather not take the risk that such a change in policy involves. Still, even without the backing of major business groups, unions, or the Democratic Party, the effort to pass the initiative has collected more than $1 million in contributions, largely from individuals in a state considered among the nation’s most eco-friendly.
Most politics these days seems a case of familiar coalitions battling over familiar policy issues framed in predictable legislative solutions. Initiative 732 turns all that on its head and prompts a new spin on the classic punch line of another comedian: Take my initiative . . . please!
Photo by Standupeconomist.com