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Study by Washington State University finds I-732 will increase the value of output in the agricultural and forestry sectors by 1.76% and 0.11%, respectively

SEATTLE, June 27, 2016 – A Working Paper published by the Washington State University School of Economic Sciences concludes that the tax swap created by I-732 will not only reduce pollution, but will also create a net economic benefit for the agricultural and forestry sectors in Washington State. The report, How Does Washington State Initiative 732 Impact the Agriculture and Forestry Sectors?, is now online at http://ses.wsu.edu/wp-content/uploads/2016/04/WP2016-8.pdf.

The study examines the impact of a revenue-neutral carbon tax, as implemented in I-732, on the agricultural and forestry sectors after the two-year initial phase-in period when the carbon tax reaches a level of $25/ton of emitted carbon and the agricultural sector is still exempt from paying the majority of the carbon tax. Key findings include:

  • The value of output in the agricultural and forestry sectors rise by 1.76% and 0.11%, respectively. While the carbon tax reduces fossil fuel use in both sectors, the influx of labor and capital from the reduction in sales tax offsets this effect leading to a net increase in output value.
  • The impact on total exports is small but positive in the agricultural sector with an increase of 1.44%. Exports in the forest sector see a negligible drop of 0.05%.
  • Capital investment by farmers is expected to increase given the reduction in sales tax. Average household consumption of agricultural products is expected to grow, with high- and low-income households seeing the largest increases in consumption. The consumption increase by low-income households is attributed to subsidies received from the Working Families Tax Rebate funded by I-732.
  • As carbon-intensive inputs become more expensive across the state, the demand for low-carbon energy alternatives, such as second-generation biofuels sourced from agricultural and forestry sectors, will likely increase.

“As this study shows, I-732 creates financial incentive to reduce pollution across key sectors of our economy,” said Yoram Bauman, founder and co-chair of the Yes on I-732 campaign. “This policy supports the state’s economic goals, while addressing our moral responsibility to protect our children and future generations from the harmful effects of climate change.”

Economists, climate scientists, and business leaders agree that the most efficient way to reduce carbon pollution is to charge a price for polluting. The concept has bipartisan support, and I-732 is one of the first climate policies in the U.S. to receive an endorsement from a sitting Republican legislator, Senator Steve Litzow. Former Republican Senate Majority Leader Bill Finkbeiner is also among the growing number of Republicans who support climate action, so long as the solution is fiscally responsible. They join the Democratic legislators who have endorsed I-732, including Joe Fitzgibbon, the House’s lead on climate policy and chair of the Environment Committee. A full list of endorsements can be found at http://yeson732.org/endorsements/.

Esteemed economist Greg Mankiw and former U.S. Secretary of State George Shultz agree that putting a price on pollution is effective because it lets market forces, rather than politicians, determine the most cost-effective way to reduce pollution and grow the economy. This model has worked successfully in British Columbia since 2008 where petroleum consumption per capita is down 19% compared to the rest of Canada and the local economy has grown at a faster pace than Canada as a whole. I-732 is patterned after the B.C. tax swap, which many economists consider to be the best climate policy in the world.

About Carbon Washington

Carbon Washington is a bipartisan grassroots group of scientists, economists, former elected officials, business owners and concerned citizens focused on seeking a solution to climate change that works for businesses and households around the state. The group developed Initiative 732 as a revenue-neutral approach to tax carbon pollution while encouraging economic growth for families and businesses in Washington. To learn more about I-732, view endorsements from around the state, and get involved, visit YesOn732.org and follow on twitter @carbonwa.

I-732 is designed to move the state toward two goals – cleaner energy and fairer taxes – with the following policy changes:

  • Tax pollution, not people. I-732 will add a $25 per ton tax to carbon pollution contained within fossil fuels
  • Pay less at the cash register. Reduce the state sales tax by one percentage point, putting hundreds of dollars a year back into the pockets of each household in Washington
  • Fund an Earned Income Tax Credit for working families. Fund the Working Families Tax Rebate to provide up to $1,500 a year for 400,000 low-income households
  • Reduce the Business & Occupation tax on manufacturing. Keep living-wage jobs in Washington by effectively eliminating the Business and Occupation Tax on manufacturing

Media Contact:

Samara Villasenor

communications@carbonwa.org

206-478-5643