Updates and Thursday March 5 meeting downtown

1) Our very own Todd Myers has an op-ed in today's Seattle Times, "Create incentive to cut emissions with carbon price." (For the record, the piece is paired with a piece in yesterday's Times, "Cap-and-invest approach good for environment and economy" by Michael Butler of Cascadia Capital.)

2) Our next downtown meeting is Th March 5 12-1pm at the usual location (1402 3rd Ave, 5th floor conference room). The agenda includes a WCI update and next steps on the spreadsheet and other updates below. I feel like we're building some momentum, so keep it up! One thing that everyone can do is try to get feedback on the proposal below from friends, local businesses, etc. (I've found that talking to local business owners is great fun! You'll certainly learn a lot about the tax burden on businesses :)

3) I've had valuable conversations with lots of different folks (see the list below), and this updated spreadsheet reflects the resulting proposal. In a nutshell, here's what the current proposal includes and how it differs from the last version:

• As before, impose a carbon tax of $50/ton of CO2 in 2010, with additional increases of $10/ton each year starting in 2015. This generates about $4.3 billion a year in 2010.
• As before, use $1.9 billion to replace the state portion of the property tax, leaving $2.4b.
• As before, set aside 10% of the revenue to offset impacts on low-income households, leaving $1.9b. (See number-crunching note about this below.)
  
• Instead of doubling the small business B&O tax credit, increase it 10-fold. This idea came from John Burbank of Economic Opportunity Institute, takes up "only" $260m, and means that the percentage of businesses who are exempt from B&O taxes goes up from 48% to 88%. (See details on the second sheet of the spreadsheet.)

That leaves $1.7 billion and the spreadsheet allows this amount to be allocated in different percentages among the following options (each with a cutesy name :)

1. The Sarah Palin: Rebate local property taxes, for a total state/local property tax reduction of over 40% if all $1.7 billion goes here.
2. The Van Jones: K-12 math/science education, higher ed clean energy research, green jobs, energy efficiency, etc.
3. The Dick Cheney: Rebate state B&O taxes across the board, cutting state B&O taxes by over 50% if all $1.7 billion goes here.
   

Right now the spreadsheet has 100% of the revenue going to the Dick Cheney option, in the hopes that this will attract AWB and/or other business groups. Time will tell if that actually happens or if we'd have a stronger proposal by switching some or all of that money to the Sarah Palin or Van Jones options, but getting business support would be fabulous, and as a first step it would be dreamy to get an op-ed signed by a major business leader and a major environmental leader. (Any ideas???)

PS. Here are some of the folks I've talked to lately. Many thanks to them for their feedback, and as always being on this list does not mean that any individual or group is supporting or endorsing anything.

• Clark Williams-Derry of Sightline Institute
  
• Michael Lazarus of Stockholm Environment Institute
• Jeff Chapman of WA Budget and Policy Center
• Doug Howell
• Dallas Burtraw of Resources for the Future (RFF, a DC-based environmental economics think-tank; Dallas has tentatively agreed to do some number-crunching for us on income-decile impacts, which is awesome)
• John Burbank and Marilyn Watkins of Economic Opportunity Institute
  
• Graham Evans of WA Clean Technology Alliance

And in the days ahead I'm hoping to meet with folks at Puget Sound Energy and others.

Notes from Feb 5 and next steps

Hey everyone: We had a small but productive meeting today; here's a summary and next steps!

In attendance: Yoram Bauman, Catherine Carey, Todd Myers

Update #1: WCI is still looking iffy (maybe 30% chance?) as far as the legislature goes, and our plan is still to be prepared to step in fast with a proposal if the WCI doesn't pass. That's a challenge because so many eyes are focused on the WCI, but I'm confident that we can make good progress in the next month or so.

Update #2: Bruce Flory tracked down some information on limitations on property tax growth (e.g., from Eyman initiatives); his whole email is below but the key message is that something in the 3.0-3.5% range is a good guess for annual property tax growth (in nominal terms), so our assumption of 4% is a good conservative assumption.

Policy: Todd Myers made a strong case that Assoc. of WA Business and other elements of the business community would be more attracted to a slimmed down proposal that focused on just three things: (1) eliminating the state property tax, (2) setting aside 10% of revenue to offset impacts on low-income households, and (3) rebating state B&O taxes. Getting business support would be amazing, so those ideas are reflected in the current spreadsheet. (If you want to compare with the previous version, there's a tab in the spreadsheet that has the old version.) However, it is also important to note that the policy discussion is still continuing (see below!) so if your favorite idea was left out then there's still hope for major changes, which I think are especially likely if the business community does not get behind this.

Next steps: In the next month we should all attempt to have one-on-one meetings with various stakeholders &etc to see (1) what they think, (2) what it would take to get their names attached to an op-ed supporting this, and (3) who else we should talk to. Todd is going to talk to the business community (and his other right-wing friends :). Yoram is going to talk to his contacts in the business and environmental and education and social justice communities, and everybody else should join in the fun. This is pretty time-sensitive stuff, so feedback via email to me would be best.

Overview: If we can get the voting public on board because of the elimination of the state property tax, the environmental community on board because of the carbon tax, the business community on board because of a hefty cut in B&O taxes, and the social justice community on board because of the offsets for low-income households, that would make one super-attractive package. Let's see if we can make it happen!

Next meeting: Th March 5, 12-1pm, same downtown location.

PS. Todd is also going to investigate the "tax creep" issue that was brought up by one Republican legislator who was concerned that local governments would respond to the elimination of the state property tax by just raising local property taxes.

PPS. Here's the property tax info, from Bruce Flory: OK, here's the scoop. The Eyman initiative that is operative is I-747. Although it passed in 2001, it was actually overturned by the Supreme Court in 2007 but then immediately reinstated by the legislature. It provides that property tax revenue from existing properties can increase by no more than 1% or the rate of inflation (as measured by the U.S. Implicit Price Deflator) - whichever is LESS - from the highest revenue over the prior 3 years. However, this restriction does not apply to new construction (anything requiring a building permit), "improvements" to property (e.g. the increase in value from subdividing a parcel even if it isn't built on), and a few odds and ends like the value of new wind turbines. Statewide, the value of new construction, improvements, etc., averages around $20.5 billion per year. With an average state property tax rate of about $1.75 per $1000, that works out to revenue of almost $36 million which is 2% of total annual revenue of $1.8 billion. This implies that the maximum increase in state property tax revenue is about 3% per year. This is confirmed by some figures I was able to get on actual and forecast increases in revenue from 2005 thru 2015. They are: 2005->2006: 3.4%, 2007: 3.8%, 2008: 3.6%, 2009: 3.1%, 2010: 0.0%, 2011: 3.1%, 2012: 3.2%, 2013: 3.2%, 2014: 3.2%, 2015: 3.1%. So I'm pretty comfortable using something in the low 3% range for our forecast of annual growth in NOMINAL state property tax revenue. For our purposes, using 4% would be very conservative. This of course assumes no change in the regulatory environment. My source for information on the I-747 limits is Kathy Beith in the Dept of Revenue Property Tax Division. My source for historical and forecast revenue growth is Valerie Torres, a tax policy specialist in the Research Division of the Dept of Revenue.

Meeting downtown Th 12-1pm

Hey everyone: Our next meeting is this Thursday, Feb 5, 12-1pm, at the usual downtown location: 1402 3rd Ave, 5th floor conference room. In case of disaster call me: 206-351-5719.

Agenda:

12:00-12:10: Introductions and updates on the Western Climate Initative and other things (including Bruce's research on property tax limits). Just for the record, there are likely to be folks at the meeting who support WCI and folks at the meeting who oppose WCI. My preference is to continue to sidestep that question and instead focus our meeting on the possibility of carbon tax legislation in the event that WCI does not pass.

12:10-12:30: Policy details concerning this spreadsheet (now updated to include inflation-adjusted numbers!). In a nutshell, the current proposal is a carbon tax of $50 per ton of CO2 [$0.50 per gallon of gasoline], rising by $10 per ton per year from 2015 on, with revenue going to (1) eliminate the state property tax, (2) offset impacts on low-income households, (3) fund clean energy R&D, and (4) reduce the B&O [business] tax.

12:30-12:50: Discuss strategy, e.g., at what point to try to publish an op-ed piece and how and when to reach out to social justice folks, enviros, business folks, and education folks.

12:50-12:55: Next steps and next downtown meetings Th March 5, Th April 2, Th May 7.