The Economics and Politics of Carbon Taxes and Regulations: Evidence from Voting on Washington State’s Initiative 732

Abstract

In November 2016, Washington State voters were presented with a ballot initiative (Initiative 732) advancing the first carbon tax on production and use of fossil fuels in the United States. Initiative 732 promised to reduce fossil fuel consumption by taxing carbon emissions, while remaining revenue-neutral by lowering taxes on businesses, consumers, and working families. In promising revenue-neutrality, Initiative 732 sought support beyond environmentalists and similarly sympathetic voters. It failed to pass, achieving 41.2 percent of votes cast. To investigate this initiative’s failure at the ballot, we analyzed zip code-level voting patterns and demographic data. Relying on a two-step LASSO (Least Absolute Shrinkage and Selection Operator) + OLS (Ordinary Least Squares) procedure, our results suggest that the framing of revenue-neutrality did not sufficiently satisfy moderate right-leaning voters regarding perceived costs of the carbon tax. We also found evidence suggesting not only that some voting segments may have opposed revenue-neutrality, but that those facing higher climate change risk did not appear to see the initiative’s value net of expected costs.

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