While it’s a commonplace that everyone hates tax increases, 2016 could see several states enact new laws to raise much-needed new revenue thanks to ballot initiatives. These measures would fund key programs like health care and public education, but the most important of all is in Washington state, where voters will decide whether to enact a first-in-the-nation tax on carbon emissions. While climate change is arguably the most important issue of our time, this measure has sharply divided even progressive stalwarts, who have long made a carbon tax one of their biggest goals.
This division is a result of the initiative’s big compromise to get fiscal conservatives on board: It’s revenue-neutral. That means that all the extra funds raised from the tax would be used to reduce other taxes, giving Washingtonians a sales tax break, a boost in the state’s earned-income tax credit for the working poor, and a business tax break to help keep manufacturing jobs in-state. These tax swaps would help increase the overall progressiveness of the state’s tax system which, believe it or not, the most regressive in the country, largely because Washington has no state income tax.
But organized labor, social justice coalitions, and many on the left were dismayed that the proposed carbon tax would surrender the extra revenue when the state so desperately needs additional public funding for things like investments in clean energy, infrastructure, education, and assistance to low-income communities of color. These progressives subsequently have withheld much in the way of financial support. Polling has been infrequent, although a recent survey from Elway Research found the measure ahead 40-32. However, given the hostility toward the measure on both the right and the left, it might still fail, and with it, Washington could miss a major opportunity to tackle climate change, even if it’s imperfect.
Other states are voting on measures designed to make the wealthy pay a fairer share of income taxes. California could vote for an income tax surcharge on individuals making over $250,000 a year. Enacted in 2012, this additional rate was set to expire in 2019, but the 2016 measure would extend it until 2030 and dedicate the extra revenue toward public education and healthcare programs. Maine could also increase its marginal tax rate on household incomes over $200,000 by 3 percent and earmark the extra funds toward public education. Although polls are scant, surveys find both measures easily passing.
Similarly, Oregon is voting on whether to increase its minimum corporate tax by 2.5 percent on businesses with sales over $25 million per year and direct the additional revenue toward education and healthcare. Groups on both sides of the issue have collectively spent $35 million campaigning for or against it, making it the most expensive ballot measure fight in state history. Thanks in part to a nearly two-to-one edge in spending by opponents, some recent polls have found the measure failing, but the outcome is far from certain.
Progressive measures like income taxes on the big businesses and the wealthy aren’t the only ones on the ballot. Oklahoma will vote on whether to increase its state sales tax by 1 percent to help fund education. While the purpose of the tax is laudable, sales taxes are regressive and hit hardest those who can least afford them.
Finally, there are two other types of taxes that states are voting on. California, Colorado, North Dakota, and Missouri could raise their taxes on tobacco products, largely to reduce smoking rates and to finance health care programs, while Colorado could also impose large payroll tax increases to finance a single-payer healthcare system. We’ll discuss these in greater detail in an upcoming post.
Other states will be watching these tax battles unfold and taking note of how they can successfully raise revenue, improve public health, and redirect economic activity. That’s particularly the hope of those backing Washington’s carbon tax, as they plan to use it as a model even for more conservative states, which will be crucial in any sustained fight against climate change.