How Much Will a New Carbon Emissions Tax Affect Your State Tax Burden?

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Carbon emissions, a leading cause of global warming, are a major topic of discussion across the 50 states. Under pressure from the global community and the federal government, elected state officials are considering new taxes to reduce emissions—and Oregon may be the first to implement such a tax on its global footprint.

Because Oregon already has one of the United States’ lowest per capita carbon dioxide emission rates, it’s important to also consider how a carbon tax might increase the tax burden of residents and businesses in a state such as Wyoming. The Equality State has the highest emission rate in the country at 112.6 metric tons per person (versus Oregon’s 9.3 metric tons).

Charging a Carbon Emissions Tax

The Northwest Economic Research Center issued a report noting that a tax on carbon emissions would have a small impact on Oregon state and local economies, but a much larger impact on reducing emissions within a few short years.

Every individual state’s current tax burden and total greenhouse gas emissions will determine how this tax would affect its residents, however. The tax would apply to coal, natural gas, and oil, which create greenhouse gasses when burned. This is on top of the gas tax, which some states have already increased.

Oregon’s Proposed Tax Rate

For Oregon to meet its goal to reduce emissions by 10 percent between 1990 and 2020, it needs a tax levy of one cent per gallon of gasoline for every $1 per metric ton of carbon dioxide. In comparison, the Canadian province of British Columbia has a $30 tax per metric ton of carbon dioxide, which has helped the province reduce its footprint by 16 percent.

It’s not simple to determine how a new tax will affect residents. According to Northwest Economic Research Center Director Tom Potiowsky, “You also need to take a look at the different regions, income groups, and industries which will have different impacts based on the carbon tax that is set.”

The number of residents in a state reduces the tax burden. In Wyoming, with its aforementioned high carbon emissions rate but low population, would hit residents harder than in a state with a larger population, such as Texas.

How Will a Carbon Tax Affect Your State Tax Burden?

The Environmental Protection Agency has put forth a plan for the U.S. to drop its carbon emissions from power generation by 30 percent (from 2005 levels) by 2030. However, as with many federal proposals, states have set their own reduction goals.

The following five states produce the highest emissions in metric tons of carbon dioxide per capita, according to Bloomberg:

  1. Wyoming: 112.6
  2. North Dakota: 79.0
  3. Alaska: 52.6
  4. West Virginia: 51.7
  5. Louisiana: 48.7

These five states produce the lowest amount of emissions of carbon dioxide per capita:

  1. New York: 8.1
  2. Connecticut: 9.2
  3. California: 9.2
  4. Oregon: 9.3
  5. Vermont: 9.6

An emissions tax would be added to state gas taxes, not replace them, so you should know your state’s gas tax rate, too. Here are the five states with the highest combined state and federal gas taxes:

  1. West Virginia: 53.00 cents per gallon
  2. Wyoming: 42.40 cents per gallon
  3. North Dakota: 41.40 cents per gallon
  4. Louisiana: 38.41 cents per gallon
  5. Alaska: 29.70 cents per gallon

As states begin to test the waters on this new “sin” tax, it’s important to remember that the goal of these taxes is to reduce America’s carbon footprint. The federal government and many state governments offer tax credits and other incentives for using alternative energy. By taking advantage of these opportunities, state residents can help the environment while reducing their tax burden.