 Okay, Bingo, we're back. It's the one o'clock rock. I'm Jay Fiedel here on Think Tech, and we're talking about—what are we talking about? Community matters, and today, ooh, a good topic, carbon tax, the carbon tax in Hawaii. How would it work? What would it do with Tom Yamachika, the president of the Tax Foundation of Hawaii? Welcome back to the show, Tom. Thanks for having me on the show, Jay. Yeah, this is going to be a great discussion. So first of all, what is the carbon tax? I mean, it's taxing carbon. Is that what it is? Yeah, it's kind of a variation on fuel taxes. You know how we pay for various things when we fill up at the gas station. But carbon tax is a little more comprehensive because it's imposed on all fossil fuels, but it's based on the amount of CO2 that burning the fossil fuel gets into the atmosphere. So like coal is the worst. So coal spews out a lot of CO2 per unit of energy that it produces, per British thermal unit, and then the least is natural gas. So there's kind of a spectrum between those two extremes and where it falls gives you the amount of tax that is put on the product. So you have to have a list of things, you have to have sort of a spectrum of how much carbon is in this or that or the other thing. And am I right about this? So you have different kinds of coal. That's right. Different emissions from different kinds of coal. So you have to include multiple coal products on the spectrum, right? Right. As you would with natural gas, gasoline, naphtha, other kinds of hydrocarbon refined products. Why do I feel that's hard to actually enforce? Because you've got to have self-reporting. You can't have the carbon man come out to see you and say, hmm, how much carbon are you spewing out today? What the Tax Review Commission, when they looked at the issue about a year ago, they said, well, it's not that tough because there are only a number of people that are fuel distributors. And you, like the way you now impose fuel tax, you enforce the tax at the distribution point. OK, so if I'm a driver and I drive down the highway burning fossil fuel, spewing carbon out of my exhaust pipe, I'm not going to get taxed. It's the guy who sold me the gas in the first place. That's right. He's going to get taxed. Right. It'll be the distribution point. So it's only one incident of tax in the chain of distribution. Right. But the interesting part about it is like the way we have our system here, there are already four different types of tax that apply to fossil fuels. OK, we have a liquid fuel tax. OK, and that's for a highway fund. So if any time you go down to the pump and you pay for gas, there's X number of cents. And that's actually the first two types because not only the state, but the county gets to impose liquid fuel tax. OK. OK. And that's for either the state highway fund, county highway fund. And that would only apply to fossil fuel, ordinary gasoline kind of fuel. Liquid fuel that's used to propel a motor vehicle on the highways. Supposed to be biodiesel. This carbon and biodiesel too don't get me wrong. Yeah. But so, OK, anyway. Yeah, I'm not sure what the tax rate for that is. I mean, they have different tax rates for different types of liquid fuels. That's under current law. OK. So, then there's what's called a barrel tax. OK. And that is not limited to liquid fuel, so that applies to coal, natural gas, anything that can be burned for fuel. Anything that's classified as fossil fuel. And it's applied to gasoline on a per barrel basis, I think it's $1.05 per barrel. And then on a BTU equivalent basis to any other fuel. What's the last one? Any other fuel. Any other fuel. Any other fossil fuel. OK. Well, I see. OK. So, it's called a barrel tax, and then it also applies to other fuel as well. Yeah. On a equivalent basis based on the amount of energy that it produces. BTU. Yeah. Right. OK. So, that's the third. And then, of course, the fourth is GET, because it applies to everything. So we have these four taxes that now apply to fossil fuels. And this carbon tax would add a fifth. So if I buy a gallon of gas at the pump and say it costs me, I don't know what it costs now, $3.75 or something, I don't know whatever it is. How much of that is going to go to the four taxes you mentioned? Actually quite a bit. I mean, I haven't sorted all of it out, but I think more than half. Wow. I think more than half would go to taxes. Wow. Now the fifth tax, that would be the carbon tax. And the carbon tax, that would, again, be on the distributor rather than me as the driver. It would be paid by the distributor. But it would, of course, it would be reflected in the price that you pay at the pump when you drive up to the gas station and look at the pump and go, oh boy, I got to pay this much? Yeah. Yeah. OK. Anything that emits carbon. And there'd be a spectrum of rates there too on how much carbon you're emitting from a given fuel or product or whatever. Yeah. Yeah. Does it go beyond fuels? I mean, somebody once made the argument at the time, I thought it was really off the wall, but that we bring in furniture with oil on it. Would it go to the oil and the furniture? Not yet. But I mean, again, it depends on how the tax is written because, like, for example, there is a federal tax on ozone-depleting chemicals. You know, like, so if you buy a refrigerator or a freezer, there are these freon gases that. In the refrigeration system. That's right. So that's taxed on the federal level. Yeah. So what it also applies to is it applies to things that were manufactured using that type of ozone-depleting chemical. So like, for example, when you are trying to manufacture an aircraft and you buy avionics, right, it turns out that the processes to make the avionics use a lot of CFCs. So there's a lot of ozone-depleting chemical tax imposed when you import avionics. Okay. So that is taxed to the manufacturer of the avionics? Yeah. Or whoever brings it into the country, basically. Okay. And then that means that ultimately the airline will pay, you know, it'll fall down to the airline and ultimately it'll fall down to the passenger. Right. Because we have to pay for what he pays and so forth down the chain. Okay. That already exists, huh? That already exists. But that's been a successful tax in the sense that we don't have so much ozone anymore. Well, that's debatable, but at least the tax is there. Okay. All right. Carbon is a problem not solved at all. That's right. And, you know, getting people to buy into a carbon tax has had some problems. For example, in France, you know, the city's now turned into an inferno because the French president had proposed this new carbon tax, I mean, which amounts to like maybe 25 cents a gallon. Okay. But, you know, people wearing these, you know, yellow vests. Guillaume Jean. Yellow vests. Yeah. They went into the street, you know, started torching things, you know, flipped cars over, total mayhem. Total mayhem in Paris. I really wonder. And then, of course, he backed off on that. But they still protest in any way and the protests continue and I don't know how he's going to, you know, bring things back to balance. Well, yeah. I mean, he said he'd hold off on enforcing the tax for, you know, he said, let's have a moratorium. But that means it comes, it's coming back. Sure. Right. That's what they didn't like. You know, that's the problem. I mean, we have—COP 24 is going on right now in Poland, which should be more advanced than COP 20 or 21 a few years ago. I think Donald Trump has really gotten in the way of the COP meetings and efforts to ameliorate global warming. And here, Macron goes out and he actually tries something on a national level for France. And this is what he gets for his trouble. So people are really not committed to dealing with global warming and carbon in the atmosphere, are they? Yeah, you know, the way it has been described, it's kind of very telling. I mean, you know, we're glad we have leaders that are thinking about the end of the world and trying to prevent the end of the world. But most of the people are trying to make it to the end of next week. They've got to pay, you know, they've got to pay to put food on the table. They've got to pay the rent. They have to, you know, deal with keeping the lights on. You know, a lot of these causes are not really resounding with those types of people. I mean, if you live in the suburbs, which a lot of working people do, you've got to pay for gas to go to work. And don't tell me, yeah, they can ride rail. I find this ultimately very tragic because climate change is relentless, it's happening. To paraphrase Marie Antoinette, right, let them ride rail. Sure. Yeah, let them eat cake, too. So, you know, leadership means trying to make the people understand, you know, it's like rail in Hawaii because in Hawaii, the government foisted rail on the people before the people knew what they were getting into. And that's why there's all this contention, in my view. So the same thing here. He tried to foist the carbon tax on the citizens of France, on Belle France, before they really knew what it would cost them and how it would affect their lives. And that's why he got the pushback. And that could happen elsewhere, too. That could happen in the United States, don't you think? Oh, yeah. Recently, Washington State, in the past general election, had a referendum of sorts and they would adopt a carbon tax. Failed miserably. Failed miserably. And the question then becomes, well, could it be replicated in other states? Could Hawaii, because of its penchant for leading the world in environmental issues, be the first to jump out ahead of the fray and adopt a carbon tax? I mean, that's what the Tax Review Commission report said, phrasing it in those terms. But is that really what the people want? Well, let's examine it and see how we feel, you and me, about how—and I know the Tax Foundation looks to avoid taxes that are really not necessary. So you start out with a bias against a given tax until it can be proven as valuable. Am I right about that? Yeah. And the way I'm looking at it is a new carbon tax would be a big burden, but I think it would be a big burden because the current proposal is to layer it on top of the four taxes that are already burdened. Which some of which are directly related to the same purpose. For example, the barrel tax, the original purpose of the barrel tax was supposed to do environmental things and protect the environment, including climate change. So now, if you add a carbon tax on top of the barrel tax, in large part you're duplicating the tax, aren't you? Oh, yeah. So right now we have a patchwork and we need to reexamine what's a real priority and act accordingly. Yeah. Well, so is there any state in the union that has successfully enacted and implemented a barrel, rather a carbon tax? Not that I'm aware of, no. Probably for the reasons we've been talking about. And so right now in Hawaii there's a legislator who has suggested a bill who will introduce or already has introduced a carbon tax bill into the legislature for consideration in the 2019 session. Am I right? Oh, yes. It could come from a number of sources because the Hawaii Climate Change Commission had six legislators in it, but you know, Senator Carl Rhodes has gone on record already as saying that he'll introduce a carbon tax bill. There was actually one introduced last session, but it didn't make the first committee hearing. Okay, let's take a short break, Tom, and we'll come back and we'll enter into Christmas future to see what would happen, okay, if such a bill actually was enacted and signed into law by Governor E. Gay in this session. Oh, I'm not sure we want to go there, but let's take a look after this short break. Hey, loha. My name is Andrew Lanning. I'm the host of Security Matters Hawaii, airing every Wednesday here on Think Tech Hawaii live from the studios. I'll bring you guests. I'll bring you information about the things in security that matter to keeping you safe, your co-workers safe, your family safe, to keep our community safe. We want to teach you about those things in our industry that may be a little outside of your experience. So please join me because security matters, aloha. And aloha. My name is Calvin Griffin, the host of Hawaii in Uniform. And every Friday at 11 o'clock here on Think Tech Hawaii, we bring you the latest on what's happening within the military community. And we also invite all of your response to things that's happening here. For those of you who haven't seen the program before, again, we invite your participation. We're here to give information, not disinformation. And we always enjoy a response from the public. But join us here, Hawaii in Uniform, Fridays, 11 a.m. here on Think Tech Hawaii, aloha. We are so happy to be here with Tom Yamachika, the tax foundation of Hawaii, talking about the possibility of a carbon tax, which has been a discussion for a long time, but I don't think people really know how it would work. So let's assume—I'm making a lot of assumptions. You can correct my assumptions. Let's assume that this—the people concerned in the legislature with climate change want to enact a barrel tax, I'm sorry, a carbon tax this year. And let's assume that it passes both houses and all those committees, whatnot, and the governor signs it. What do you think it would look like, this carbon tax? Well, you know, let's kind of pause a little bit before we get all the way to the finish line. I think initially you're going to have some disagreements as to where the tax is supposed to go, because I think, you know, if you put this up for consideration, there's going to be a feeding frenzy as to who is going to get the revenue from it, okay? What are the possibilities? Department of Transportation, for example. They get the fuel tax now, so— And they get part of the barrel tax, too, I think. No. Oh, that's right. They wanted it in the last session, but they never got it. Yeah. So the Department of Transportation is going to say, well, hey, this is about where we're going to tear on the roads, and, you know, we want part of the revenue. And you have the farmers. Farmers are going to consider that they're exempt from the fuel tax now, because they're not doing work that impacts the highways. And so they say, well, why should this fall on us? And, you know, the other side of the story is, well, you're running machinery. The machinery emits CO2 into the atmosphere, so you're just as liable or you're just as responsible as that person who just drove down the car in a semi, okay? Will they like that answer? Probably not. Then they're the counties. Okay. So if you're going to load up on fossil fuels, the counties right now have a piece of the action as they get to apply a liquid fuel tax. So how are they going to fare? Are they going to get a piece of this? Is the county highway fund going to get a piece of this? Is anything in the county going to get a piece of this? And then there are the people who are concerned about the environment. The Department of Land and Natural Resources, they get a piece of what comes out of the barrel tax, right? So they are going to be right up there and they're going to be saying, well, you know, this is all about damage to the environment and we fix it. We are out there planting trees and all that kind of stuff to deal with the effects of carbon pollution. The same way the barrel tax is supposed to deal with the environment and with making things green, although that hasn't really happened. And half the barrel tax goes into the general fund. Right, which is not what was intended at all. So you have the possibility of a hijack on any of these taxes, hijack into the general fund. Or other places, you know. Okay, so that's, so the big question is where does the tax money go? Who gets it, I suppose, what is it used for? So somebody is going to have to make a statement of that and I think everybody will be referring back to the barrel taxes. You know, it's like I went to law school, I had a professor in criminal law as it were. He said, when the legislature passes a statute, it should say at the bottom, this one we really mean. Okay? And he said, and if they care a lot, they should say this one we really, really mean. So you know, if you want to avoid the kind of fragmented result that the barrel taxes had where nobody really, you know, the original purpose of the tax has gone in ten directions. We should have some statement at the bottom of the carbon tax bill that says we really mean it. And this is where we want it to go and don't change it, speaking to future sessions and future legislators. Yeah, which, which, which will never happen? Never happen because they reserve the right to change anything about anything. So yeah, that's part of being, that's part of being a legislator. I guess so. Anyway, so all right, so that's, that's one thing, but you know, we have to put this in perspective, the barrel tax, I'm sorry, correct me, hit me, the carbon tax is intended to discourage the use of carbon. It's intended to get on board with, with global climate change and COP 24 or whatever COP you're talking about. It's intended to, to be a leader, a leadership point for Hawaii to say to the world, yes, we can, we can have a carbon tax, then we can discourage the, the use of carbon and emissions from carbon. Isn't that what really counts here? Will that work or are we just, you know, blowing in the wind, literally? Well, again, you know, it really depends who you care about, you know, do you really care about these, you know, lofty global goals or are you really caring about your people? Because because, because your people are the ones who have to go to work every day from, from Ewa Beach or, or Pukalani or, you know, wherever they're coming from. How are you going to help them do that if, if you're going to, you know, really lay into their, you know, what is it, what is a necessity for them in terms of how they make their livelihood? Well, that's the same thing as in France, you know, they're not going to be concerned about the ultimate success of the world, the survival of the, of the human race. They're going to be concerned about getting to work tomorrow. They're going to be concerned about their own personal family finances. And so, and that's, and that's enough for them to torch the police. Yeah, I mean, we can have a real public outcry against such attacks, don't you think? Yeah. And, and so, and so that really, I think comes back to, well, you know, who's the government supposed to serve, right? They're supposed to serve the people. The, the legislators are there to kind of have, you know, both the short term and long term interests of the people at heart. And so they really have to figure out a way to sell this. Yeah. Well, I mean, the purpose, looking at it from the 50,000 foot level, where all that stuff gathers, look at it from the 50,000 foot level. And the purpose of this tax, really, I mean, putting raising revenue aside, you know, the legislature always wants to raise revenue somehow and not be seen as raising revenue. It's really for the benefit of the world in general. It's to save the world. It's the, it's to save us against climate change, which is, you know, becoming more of a threat all the time. But isn't that, Tom, isn't that really within the purview of the federal government? If there is going to be a carbon tax, shouldn't, shouldn't that be at the federal level, why should one little state in the middle of the Pacific, you know, that, that has clean air and all that? Why should we care about, you know, the future of the world? It's because, because we have to lead the world. I mean, that's what that's what the proponents are going to say. So it's a leadership thing. But yeah, like we led the, we led the nation and prepaid health care. Why can't we lead the nation in this too? It is this environment. That's an expensive price to pay to be able to say to yourself, I'm leading the nation now, the world. Yeah. Yeah, it is. And people may not be willing to pay that price. They may say, I don't care. If, if the federal government doesn't want to do it, why should I want to do it? Isn't this really a federal matter, a federal issue or United Nations or something other than one little tiny state, you know, and, you know, we can't have that much effect on things. If we, if we we got to start somewhere. OK, we got to start somewhere. I love when I get you to make these arguments. OK, so we do this. We set a price on it. And the price is intended not so much to raise revenue, but to discourage people from using carbon products, emitting carbon. OK, and that would help in reaching 100 percent by 2045. It would help to move to electric vehicles, probably on the highways. It would help. Well, I mean, you know, electric vehicles, let's let's kind of not go there just yet, because electric vehicles just take the electricity that's produced by somebody else. Of course. OK. And and the the electric companies, it depends on how they generate the electricity. Yeah, right now the right now the Burden-Munger fuel, right, which is which is a fossil fuel, as you as you are well aware. Yeah, and probably has more hydrocarbons, you know, per per cubic inch than than even regular fuel. I mean, a regular. So it's a mixed bag. You say we're going to impose a carbon tax on gasoline, or we're going to in order to incentivize electric vehicles when the electric vehicles are running on another kind of fossil fuel. That may change in the future, but for now it's it's hard to make that case. So, I mean, my my Gadfly question I posed to you earlier still stands exactly why would we want to do this? I mean, if the if the legislature wants to raise revenue, why doesn't it just increase the income tax? That's less regressive, isn't it? It seems more fair to a state where you have and that's that's one of the that's one of the biggest problems of a carbon tax is regressive. Yeah. Yeah. It's it's it's not going to hit, you know, the wealthy harder than the the middle class. So it'll be the lower middle class will be the other way around. Yeah. OK. So here we have this drawing a geographical map. I don't know if this is happening in Europe. Obviously, it's not happening in France right now. And there are other countries that have adopted. There are. OK. Well, good for them, points for them. You know the countries? I think Japan is one. There are some other European countries that have. I think just just a handful. So anyway, so we don't have any state in the in the mainland that is doing this. We have the possibility it'll happen here, but I think there'll be plenty of pushback on it just on an economic and tax policy basis. And why me? Why do I care? Kind of basis. We have the federal government under Trump. It's not going to enact a carbon tax. Republicans are am I right? They're not going to do that. Maybe the next administration, but not it's not this one. Not going to happen. I mean, we pulled out of cop anyway. So gee whiz, this isn't moving at the speed we'd like to see. I mean, if we are environmentalists, if we are looking at climate change, isn't isn't isn't it appropriate to make a little we little we carbon tax, little tiny carbon tax and just hold it there and see what happens and then we make it bigger later. That's always a possibility. I mean, taxes never, you know, get repealed. A tax bill never gets repealed. Yeah, I mean, that's what happened to the barrel taxes started off at five cents per barrel, which was, you know, enough to get its initial job done. But but not not big enough to be a problem. Then it came to a dollar five, which is, you know, twenty one times what it used to be. And most of that was, like I said, for general revenue raising. So is that what's going to happen with this? We don't know. We'll have to see. No. But what do you think? Can you want to make a projection for me on how you think this is going to go? Will it get passed at all? If it is passed, what will the amount be? You know, will it be a little or a bigger amount? And what will the people say about it? I think there's going to be a lot of debate. I think people first have to understand what it is and how it'll affect them. And I think once they do, they'll stop pushing back. Because we we have a lot of taxes already that we pay in in paradise. Yeah, we're one of the highest tax rates in the country far as state income tax is concerned. Yeah. And then also overall burden is, you know, we're not too shabby either. Yeah. Right. And our gross exercise taxes gross, actually. Yes. Exactly. So at the same time, with all of that, we don't have enough money to pave the roads to, you know, handle the homeless to make payments to the state employee's retirement system. We're having to do the regular business in a state or a city. So I'm not sure people keep up our educational facilities. Yeah. It's going to be an exciting session, isn't it? I'm sure it will. Would you come and talk to us about it? Of course. Thank you, Tom Yamachika, President of the Tax Foundation of Hawaii, watching out for us. Thanks so much.