What is a tax swap?

I-732 is not a tax increase, it is a tax swap. 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, business and families we want and onto the carbon pollution we don’t want.

I-732 Tax Swap Explained

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.

To find out how a carbon tax would impact YOU, use the UW tax swap calculator below.

High Energy User Assumptions Powered by the U.W Tax Swap Calculator

  • Drive an average 12,500 miles per year in an inefficient car getting 17 MPG
  • Live in an average size 2,000 sq.ft home that uses 20% more energy than normal
  • Live is PSE service territory with most carbon intensive fuel mix in the state
  • Heat with Natural Gas which is more carbon intensive than WA electricity

A single mother struggling to take care of her two children while earning $30,000 per year would:
Save $143 on purchases exposed to sales tax
Spend $413 more on energy each year
Receive a $724 WFTR check
Each year this single mother would have $454 more in her pocket as a result of passing I-732

A married couple struggling to take care of three children while earning $40,000 per year would:
Save $174 on purchases exposed to sales tax
Spend $413 more on energy each year
Receive a $654 WFTR check
Each year this family would have $415 more in their pocket as a result of passing I-732

Low Energy Bus-Rider Example Powered by the U.W. Tax Swap Calculator

A single father raising his son on $20,000 per year, who doesn’t own a car and lives in a 500 sq.ft. apartment in Seattle that is heated by an electric baseboard heater.

This single father raising his son would:
Save $108 on purchases exposed to sales tax
Spend $4 more on energy each year
Receive a WFTR Check for $740
Each year this single father would have $844 more in his pocket as a result of passing I-732

What about the average Washington Household & the Wealthy?

A married couple with two children earning $65,000 per year, living in Seattle, driving a 30 MPG car 12,500 miles per year, while living in a natural gas heated 2,000 sq.ft. home and traveling 6,000 miles per year by air.

This average Washington family would:
Save $244 on purchases exposed to sales tax
Spend $216 more on energy each year
Each year this average family would have $28 more in their pocket as a result of passing I-732

A wealthy household with one child earning $350,000 per year, living on Mercer Island, driving a Hummer, 12,500 miles per year, while living in a natural gas heated 5,000 sq.ft home and traveling 20,000 miles per year by private jet.

This wealthy family with one child
Saves $782 on purchases exposed to sales tax
Spends $1,679 more on energy each year
Each year this wealthy family would have -$897 in their pocket as a result of passing I-732