I wrote recently about a carbon tax referendum in Washington State. Sadly (in my view), it was voted down.

The carbon tax initiative (I-732) garnered only 42 percent of the vote in Washington State. The tax was supposed to be revenue neutral by lowering the state sales tax by 1 cent and provide tax rebates of up to $1,500 per year to 460,000 low-income households. The initial $25 per ton would have boosted the price of gallon of gas by about 25 cents, and added 2.5 cents to each kilowatt-hour of coal-fired electricity, and 1.25 cents to electricity generated by natural gas. Interestingly, the proposal which aimed to cut emissions of carbon dioxide that are contributing to man-made global warming was opposed by many leading environmentalist groups. Why? Largely because of the tax’s revenue neutrality. The climate activists wanted to use the revenues to “invest” in various projects such as subsidizing solar and wind power schemes, mass transit and job training for folks put out of work by climate policies.

It’s unfortunate. Let’s review: Taxes on externalities (which occur when the activity of Group A results in a profit while unfairly imposing a cost on Group B) are a good thing for at least three reasons. First, they give Group A to engage in less of the offending activity because they now have to pay the cost rather than imposing the cost on someone else. Second, if Group A decides the activity is still worthwhile, revenue is raised for the government which it can spend on some worthy cause, like helping Group B. Third, the revenue raised by taxing bad things can be used to reduce taxes on good things, like work and savings and investment and making a profit without hurting other people. All this is good for people and the economy as a whole. The only party hurt is Group A, which had no right to profit at everyone else’s expense in the first place. The reason we don’t do this more is that Group A is able to use some of its profits to buy off politicians and mount propaganda campaigns to convince the public to vote against their own interests.