Tax Swap Overview

I-732 is not a tax increase. It will not increase the size of government, its budget, or the total amount of taxes we pay. I-732 simply shifts our existing tax burden away from the goods, businesses, and families we want and onto the carbon pollution we don’t want.

The tax swap occurs within the State General Fund, which is currently $21 billion per year. The new carbon tax revenue adds $2.2 billion to the general fund. The tax reductions legislated by I-732 remove $2.2 billion from the general fund.

These tax reductions come from reducing the state-wide sales tax one full percentage point, reducing B&O taxes on manufacturers to .001% and providing a Working Family Tax Rebates to low income families.

The challenge of implementing a carbon tax is it alone can be regressive and hit the poor the hardest because low-income households spend a larger portion of their annual income on energy. At the same time, they are most exposed to the pollution our energy consumption creates.

I-732 offsets the regressive impacts of a carbon tax by reducing the most regressive tax in Washington State, our sales tax, by 1% and by funding the Working Family Tax Rebate (WFTR) which creates a 25% match of the Federal Earned Income Tax Credit (EITC). This program provides up to $1,500 per year for 460,000 families in Washington.

The result? Even high-energy consuming working families save hundreds each year with I-732.

Take a look at our Average Washingtonian Tax Swap Impacts model to see how it would impact the average Washingtonian or use the UW Tax Swap Calculator below to find out how I-732 would impact YOU.

Try the UW Tax Swap Calcualtor