Rhode Island lawmakers are considering imposing a carbon tax that would increase energy costs and other prices of goods and services in the state.
The tax would start at $15 per ton, increasing by $5 per ton each year thereafter. It would go into effect only if neighboring Connecticut and Massachusetts adopt coordinated, virtually identical carbon-dioxide tax laws as well.
The bill being considered in the Rhode Island Senate would tax carbon-dioxide emissions from fossil fuels, natural gas, gasoline, coal, propane and other petroleum products sold in the state, based on the amount of emissions each fuel produces.
The law would establish a clean-energy and jobs fund intended to help residents and employers shift to cleaner-energy options and to alleviate economic harm from the tax. It is unclear how the fund would operate.
Anti-Business, ‘Regressive’ Tax
Tim Benson, a policy analyst with The Heartland Institute, which publishes Environment & Climate News, says the carbon tax would add to Rhode Island’s high energy costs. The Tax Foundation ranks Rhode Island’s tax climate as the 44th worst in the nation. According to the Energy Information Agency, the average price of electricity in Rhode Island in 2015, 17.01 cents per kilowatt hour, was nearly 70 percent above the national average of 10.41 cents per kilowatt hour.
“Rhode Islanders already put up with the second-highest retail electricity prices in the continental United States, according to the U.S. Energy Information Administration,” Benson said. “They pay the country’s third-highest total energy costs, and their state’s tax environment is one of the worst in the nation. A carbon tax would just add on to these miseries.”
Benjamin Zycher, the John G. Searle Chair at the American Enterprise Institute, says tax increases hurt states’ business environments and make companies less efficient.
“Rhode Island’s carbon tax would inevitably increase [the state’s] energy costs,” said Zycher. “Tax increases generally have the effect of reducing resource productivity for state economies as a whole.”
Energy taxes are also regressive, hitting the poorest residents the hardest, Benson says. The Congressional Budget Office found a $28-per-ton carbon tax would result in energy costs 250 percent higher as a percentage of their income for the poorest one-fifth of households than the richest quintile, Benson says.
Raising Other Costs
Poor families will also face higher fuel prices and increased prices for other basic goods, including food, housing, furniture, and items made of plastic, all of which require fossil fuels in their manufacture and delivery, Benson says.
“Low-income families in Rhode Island, already pinched by the state’s high costs, would have less money to save and less money to spend, thanks to the increased cost of goods and services they spend proportionally more of their income on,” said Benson. “Simply put, this tax is a terrible policy for Rhode Island families.”
Veronica Harrison ([email protected]) is the marketing director at The Heartland Institute.
Tim Benson, “Rhode Island Carbon Tax Proposal Harmful to State Residents,” Research & Commentary, The Heartland Institute, April 26, 2017: https://heartland.org/publications-resources/publications/research–commentary-rhode-island-carbon-tax-proposal-harmful-to-state-residents