Think Globally, Tax Locally

In June, Portland Mayor Charlie Hales told a visiting environmental delegation from the United Nations his city would be a leader in fighting global warming.

"We must redouble our efforts to lead this work into the future, sharing our grand experiments with the world," Hales said. "Doing the right thing isn't asking [citizens] to take cod liver oil."

The mayor also promised he would "identify new revenue"—jargon for higher taxes—to pay for those ambitions.

Open wide-—the cod liver oil is coming.

As wweek.com first reported Aug. 16, Hales' office is backing a telephone survey of Portland voters to see whether they would support "a local tax on producers of carbon pollution to help reduce the impact of climate change."

Translated: Hales is looking at increasing utility taxes by 3 percent and adding a city tax of 4.5 cents a gallon at the gas pump.

"This isn't just to fill general coffers," says Hales policy director Josh Alpert. "This would be targeted to energy efficiency."

Hales is tempting opposition from powerful interests—namely, private utilities Portland General Electric, Northwest Natural and PacifiCorp—and the limits of voters to take on new local taxes. (Hales is floating multiple revenue-raising proposals this week; see here.)

The gas-tax idea is one Hales has floated before. He's promised to complete every street in Portland within 20 years—that includes paving the city's dirt roads, building sidewalks and creating "green streets" with pervious surfaces ("Stuck in the Ruts," WW, June 19, 2013).

The gas tax would raise about $6 million a year—nowhere near what's needed to fulfill his promise.

The higher utility tax would raise another $21 million and be tacked on to the right-of-way taxes city residents already pay on their electricity and natural gas bills.

The poll now in the field—crafted by Hales' office and the nonprofit Oregon Environmental Council—is testing 15 possibilities of where that money could go, from adding electric car-charging stations to helping low-income families weatherize their houses.

Taxes on carbon emissions have been gaining momentum worldwide in recent years. Boulder, Colo., became the first U.S. city to levy a carbon tax in 2007; voters passed a five-year extension last November. 

British Columbia introduced a carbon tax in 2008, which has collected $3.7 billion and proved politically popular enough that B.C. environment minister Mary Polak traveled to Salem this spring to promote the idea to the Oregon Legislature. 

Hales called the three major power companies last week to warn them the poll was going into the field. 

"We're not sure our customers should be singled out to pay for government programs," says Northwest Natural lobbyist Gary Bauer.

PGE spokesman Steve Corson says the tax would cost customers more money without reducing carbon use. And he says people who pay more for renewable energy sources could pay even higher taxes on top of that premium. 

"It seems like there's some irony there," Corson says. "You've stepped in to do extra and now you're paying more. Oops."

Alpert says the mayor's office would consider tax offsets to encourage renewable energy use. "We tested concepts, not details," he says.

The bigger problem for Hales is that he's entering a crowded tax market. The combined state and county gas tax is 33 cents a gallon.  Portland already levies a 5 percent tax on power-utility revenues. And the state of Oregon is also considering some kind of carbon tax.

Alpert says that's why the city is taking the public's temperature.

"There's always concern about tax fatigue," he says. "We don't know where that sweet spot is, when voters say enough is enough. That's why we're doing our due diligence.” 

WWeek 2015