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Washington State to Tax Carbon Pollution?

Washington State is the first state to propose directly taxing carbon emissions, but this has proven controversial among environmentalists. This tax is a direct attack on global warming. The purpose of the tax is to raise costs for polluters, which in turn will likely raise prices of the goods and services they produce. To the extent producers, e.g., energy providers, do raise prices, demand for the polluting goods and services will fall and, presumably, so will the amount of pollution. Such taxes, which reduce pollution to the socially “best” level (what economists call the optimal level), are called Pigovian taxes.

In economic terms, “best” means the loss of the benefits of the product or service (like electricity to light and provide air conditioning for homes and hospitals, etc.) are just balanced by the decrease in negative impacts (like reductions in health problems and other negative effects of pollution). But this leads to a critical difference between liberal and conservative economists.

In Seattle, some (many?) environmentalists oppose a tax on carbon as proposed because it would be used to lower other taxes rather than simply add to the tax base (Seattle News). Greg Mankiw, a conservative economist, explained that this was just what was wrong with the protests:

Skeptics of Pigovian taxes on the right sometimes argue that such taxes are good in principle but in practice the left will co-opt them and, rather than using the revenue to reduce other taxes, will use it to fund ever larger government. Sadly, that point of view is getting some support in Washington state.

In fact, as John Whitehead, points out in an August 3, 2015 post, the definition of a Pigovian tax does not specify how the tax is spent, whether to reduce other taxes or for some other public purpose (as the environmentalists who oppose current plans argue). That is a political judgement and why should such a judgement not be left to the good people of Washington State?