A smarter tax for Oregon

 Tom Potiowsky is director of the Northwest Economic Research Center.

It’s an exciting time for those of us seeking new sources of revenue and improvements in Oregon’s tax system.

In mid-March, the Minister of the Environment for British Columbia traveled to Salem to testify about B.C.’s successful experience with a carbon tax, which they’ve had in place since 2008. It was my honor to testify alongside the Minister about the findings of PSU’s Northwest Economic Research Center’s new report on how a carbon tax could work in Oregon.

The report, “Carbon Tax and Shift: How to make it work for Oregon’s economy,” runs through multiple scenarios that examine the most effective way to structure and reinvest revenue from a carbon tax. We called the report a “carbon tax and shift” because, quite simply, the premise is to shift taxes away from things we want more of, such as income, to things we want less of, like greenhouse gas emissions.

Of all the scenarios NERC ran, we concluded that the most promising designs — those that provide economic benefits and growth — devote a majority of revenues to corporate income tax cuts, a portion to personal income tax cuts (including low-income household relief), and using a portion of revenue to reinvest into Oregon’s economy.

These recommended scenarios assume either 10 percent or 25 percent of revenues are reinvested in projects that reduce emissions while creating additional economic activity, like industrial and residential energy efficiency projects and transportation infrastructure.

The results were striking: A statewide carbon tax and shift policy has the potential to generate annual revenues of up to $2.15 billion over a 20-year horizon, and gets us within 25 percent of the state’s 2020 climate goal, all while shrinking income and business taxes. These scenarios also resulted in a net job growth, but essentially no significant change to Oregon’s employment numbers.

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