Newsom proposes carbon tax

Mayor Gavin Newsom plans to ask voters next year to approve a “carbon tax” on businesses that he says would provide a financial incentive for conserving energy and motivating workers to use public transportation.

The ballot measure would increase the city’s 5 percent commercial utilities tax by an as-yet-undetermined amount to encourage energy-saving steps by hotels, offices and other nonresidential buildings, Newsom said in a recent interview with The Associated Press.

To keep the higher rates from becoming an economic drag on the city, the initiative would carry a corresponding decrease in the 1.5 percent payroll tax on for-profit businesses in San Francisco, according to the mayor.

Last year, Boulder, Colo., became the first U.S. city to adopt a tax to combat global warming, specifically an electricity bill charge on kilowatt-hours used. Officials in Portland, Ore., last month proposed charging developers for every home they build that does not greatly exceed the city’s energy efficiency building requirements.

Newsom said that by tying the revenue from the proposed carbon tax to lower payroll taxes, his proposal would make San Francisco the first city taking a business friendly, “revenue-neutral” approach to the idea of pollution pricing.

“That’s the exciting debate that is taking shape around this country – replacing a job hindrance tax with a tax that should be taxing something that is inherently bad, which is greenhouse gas emissions,” he said.

The mayor’s staff still is writing the measure, which Newsom said he intends to submit for the November 2008 ballot.

The plan, as it stands now, is to include a second payroll tax cut for businesses that succeed in getting more of their commuting employees to give up cars for public transportation, said Jared Blumenfeld, director of the San Francisco Department of the Environment.

A third piece of the carbon tax proposal would raise garbage collection and dumping fees for both homes and businesses on each bin of waste that is destined for a landfill instead of ready to be recycled, Blumenfeld said.

Under the working draft of the proposal, the payroll tax decrease linked to higher utility bills would come as a fiscal year-end rebate, said Ted Egan, the mayor’s chief economist. How big a payroll tax cut businesses get would depend on how much revenue is generated by the higher utility tax, Egan said.

Every business that pays both taxes would receive the same percentage cut to their payroll taxes, regardless of how much they curb their gas and electricity use, Egan said. Those that fail to adopt energy efficient measures, however, would not enjoy as much savings as companies that embrace the concept because their utility bills would be higher, Newsom said.

“Net neutral does not mean there won’t be an increase for those who do absolutely,” said the Democratic mayor, who last month was re-elected to a second term. “They should pay more, and that’s the point.”

If enough businesses take significant steps to reduce their reliance on conventional energy sources, the utility tax over time would theoretically cease generating extra revenue that could be returned to them through the payroll rebate, Egan said.

In that case, the city could either approve another carbon tax or be satisfied with its contribution to combating global warming, he said.

Jim Lazarus, vice president of public policy for the San Francisco Chamber of Commerce, said it was too soon to say whether local businesses would back the ballot initiative because too many details remain to be worked out.

Among the questions Lazarus had was how a carbon tax would affect different types of businesses, whether companies that already have adopted significant energy-saving measures would be penalized, and if the payroll tax reductions would be financed over the long-term.

But the chamber has generally supported legislation to reduce global warming, he said, including a law signed last year by Gov. Arnold Schwarzenegger that requires California air regulators to create laws and incentives that would reduce the state’s greenhouse gas emissions by 25 percent by 2020.

“We are very supportive of all the steps the mayor and the city have taken to get in front of reducing the carbon foot print of the residents and businesses in San Francisco,” Lazarus said. “Lots of issues have to be worked out, but we look forward to sitting on whatever committee the mayor appoints to work all of this out.”

— AP

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