California Lawmakers Toy With Idea Of Replacing Sales Tax With A Carbon Tax

Updated 5:12 p.m.

What if products sold or used in California were taxed based on how much carbon is emitted during their production, not how much they cost? Some California lawmakers want to find out.

The idea is that a carbon tax would eventually replace the state's sales-and-use tax in order to reduce greenhouse gas emissions.

“Some products will cost quite a bit less as a result of the implementation of this and others will cost more,” said Santa Monica Democratic Sen. Ben Allen, who authored a bill to study how the state could implement a carbon tax.

If the bill — Senate Bill 43 — becomes law it’ll require the California Air Resources Board, with aid from the California Department of Tax and Fee Administration, to submit a report to the legislature by 2021.

“If we don't figure out a way to [combine] our environmental goals into our capitalist structure we will not do what we need to do to scale the environmental message that California is sending to the rest of the world,” Sen. Allen said of the state’s ambitious climate goals.

But the study bill is just that, a way to see if this way to reinvent the state’s sale tax is worth investing in. Allen says the goal is to determine the feasibility and practicality of the potential changes. If SB 43 becomes law, then the agencies involved would have five years to come up with answers.

Sarah Boot, with the California Chamber of Commerce, wrote a blog post about the bill saying “The goal is to use higher prices to influence Californians to purchase products in a way that is supposed to help reduce climate change.”

Still, Boot has major questions about SB 43, including, what determines “carbon intensity” and how the carbon sales tax of each product would be tallied.

“Could they assign the different rates of carbon sales taxes to categories of products?" Boot wrote. "Or would this be unfair because two companies could produce the same type of product with significantly different carbon intensities?”

Rob Lapsley, president of the California Business Roundtable which opposes the tax, says the ideas aren't new and could also be an excuse for CARB “to achieve its policy goals."

"CARB has always wanted a carbon tax in lieu of a cap and trade system," Lapsley says. "They haven’t had the support for it. So, this could be a backdoor way to get to that.”

But Stanley Young, communications director for CARB, said Lapsley’s statement “is categorically false” and that the agency “has always supported cap-and-trade over a carbon tax.”

“A cap-and-trade program is based on a steadily declining limit on climate pollution, but you can never be sure if a carbon tax will actually deliver needed greenhouse gas reductions, which is, after the goal of any climate change program,” Young said.

Lapsley, with the California Business Roundtable, also says introducing another a tax like this would be a detriment to the state and he questions who it will benefit. He says a carbon tax could disproportionately affect low-income people and communities of color.

“It would be such a massive tax on California’s economy and residents that overall that we just don’t see it as practical or workable,” Lapsley said.

Correction: A previous version of this story misidentified Sarah Boot, the author of the California Chamber of Commerce blog post.