Americans for Tax Reform (ATR) recently released a letter to the Rhode Island General Assembly urging legislators to oppose the “Energize Rhode Island: Clean Energy Investment and Carbon Pricing Act” of 2017 (SB 365). Rhode Island consumers and businesses already face the eighth highest overall state tax burden in the country. The Rhode Island carbon tax proposed in SB 365 would only make matters worse by levying a $15 per ton carbon tax on the state, which would increase $5 annually.

A carbon tax is likely to hinder economic competitiveness in the Ocean State by inflating the cost of energy, in turn negatively impacting businesses, jobs, and the price of consumer goods, thus increasing costs across the board for Rhode Islanders.

A study by the National Association of Manufacturers, based on a $20 per ton tax rate, reveals where the brunt of this misguided legislation will be felt if the tax is implemented. If this bill becomes law, Rhode Islanders will experience employment loss, elevated energy bills, and increased prices at the pump. Just one year after implementation, with a rate of $20 per ton, Rhode Islanders can expect the following:

Increased Prices at the Pump. In 2016 Rhode Island’s gas tax was the 9th highest in the nation, and the proposed carbon tax would only drive the rate higher. In addition to the federal gas tax of 18.4 cents per gallon and the Rhode Island state gas tax of 34 cents per gallon, SB 365 would add an additional 15 cents per gallon, totaling up to a 67.4 cents tax per gallon for topping off the tank.

Elevated Electricity Costs. The cost of natural gas is projected to increase by 40 percent in the state, driving up energy costs for residents and businesses. Homeowners would suffer as Senate Bill 365 would create significant increases in household electricity rates, with an average increase of around 22 percent. Such an increase energy prices would also ripple through the economy raising the costs of consumer goods, an impact that would fall hardest on the state’s low-income residents.

Evaporated Employment Opportunities. A $20 per ton carbon tax “would deal a blow to employment in Rhode Island, with a loss of worker income equivalent of between 2,000 to 5,000” jobs after the first year rising above “5,000 jobs by 2023.”  

Economic Sectors Would Spiral South in 2023. Economic sectors like services, energy-intensive manufacturing, and non-energy-intensive manufacturing face an aggregate loss in economic output that could reach a projected 2.6 percent by 2023.

Reduced Economic Competitiveness. Rhode Island currently ranks 44th worst on the bipartisan Tax Foundation’s 2017 State Business Tax Climate Index. Implementing SB 365 in Rhode Island would only slow down an already burdened tax climate. Bordering states would gain even more of a competitive edge over Rhode Island if SB 365 became law, which would only hinder the state’s competitiveness and deter business investment in Rhode Island further.

If passed, residents and businesses that call Rhode Island home will see employment loss, economic sectors deteriorate, electricity bills jolt up, and prices at the pump pile up. Lawmakers should oppose Senate Bill 365 and protect the residents and businesses in the great state of Rhode Island.

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