Carbon Fee on Fuel Would Cost Massachusetts Households Hundreds of Dollars a Year, New Study Says

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The Massachusetts economy took a hit as a result of government restrictions on businesses amid the coronavirus pandemic.

Would enacting the Transportation & Climate Initiative carbon fee on fuel make it worse?

That’s what the Fiscal Alliance Foundation & the Beacon Hill Institute concluded in a recent study.

The study indicated that, if enacted, the transportation and climate initiative would cost Massachusetts households an average of $630 each year, eliminate 9,993 Bay State jobs in 2022, reduce disposable income by $1.649 billion, cut business investment by $305 million, and result in the state’s gross domestic product dropping by more than $1 billion.

“The BHI study confirms what most people intuitively already understand — increasing costs to consumers in the midst of one of the worst pandemics and economic downturns in history is a bad idea,” Fiscal Alliance Foundation spokesman Paul D. Craney said in a statement. “It hurts our workers, it hurts our businesses, and it hurts our state. Most of all, the brunt of the costs of this program is going to be carried by the people who are least able to afford it:  blue-collar workers, essential workers, and the poor.”

Craney noted that Governor Charlie Baker, who has supported the Transportation and Climate Initiative, said on November 23 that since the program was based on pre-coronavirus traffic congestion it may be time to re-think the proposal, at least in the short run.

“This study confirms the Governor’s wisdom of that decision,” Craney said in a written statement. “At this point, any involvement for Massachusetts to join TCI will only further damage our state’s economy and slow our recovery.”

The Transportation and Climate Initiative is a proposal to create a 12-state pact featuring New England and Mid-Atlantic states to try to reduce carbon emissions by charging a fee to fuel providers for their contribution to carbon emissions, with the money to go toward expanding public transportation.

The fee would increase the price of gasoline. How much is a matter of dispute, but a report from the Beacon Hill Institute sponsored by the Fiscal Alliance Association puts the added cost at 18 cents per gallon for gasoline and 36 cents per gallon for on-the-road diesel.

The Fiscal Alliance Foundation and the Beacon Hill Institute held an online press conference Friday, December 18.

A participant, Chris Carlozzi, state director of the National Federation of Independent Business Massachusetts, said increasing fuel costs would add another expense for businesses that already have to spend more to make less amid the pandemic.

“It becomes even more difficult for these businesses that are spending money in areas they’ve never spent before trying to retrofit their businesses to operate safely and to even be allowed to operate. Things like plexiglass and increased sanitization,” Carlozzi said during the press conference. “Small businesses have had to go through quite a bit of money that they didn’t think they’d ever have to spend on these types of products and services. Now TCI would increase what they have to spend money on. Small businesses require fuel. They have to drive to locations. That plumber, electrician, pizza delivery person, those types of businesses require fuel.”

“If you make it more expensive for those businesses to operate, which the pandemic has already done over the past few months — in some cases infinitely more expensive — it’s going to be harder for businesses to survive,” Carlozzi said.

Carlozzi predicted that if the current economic circumstances persist for the next six months, about one in four businesses will not survive.

He highlighted other government-mandated costs increases businesses in Massachusetts are encountering:  Unemployment insurance benefits have gone up, the minimum wage is set to increase from $12.75 an hour to $13.50 an hour to start 2021, and the state made doing business more expensive last year by implementing a 0.75 percent payroll tax to fund paid family leave.

State Representative David DeCoste (R-Norewll) said that when it comes to restaurants and gyms, the situation is close to a depression in 2020 Massachusetts.

Supporters of the Transportation and Climate Initiative call it a fee, not a tax, but DeCoste sees little difference, and he argued that it would hurt people can can least afford it.

“This tax, this program, if implemented, will be regressive. It’s going to hurt the people who are working for a living:  the working class, the small businessmen and women who are right now trying to survive,” DeCoste said during the press conference. “It’s going to drive more businesses — to the extent to which they can pick up and move — drive businesses elsewhere and retired folks elsewhere. Talk to any of my peers along the New Hampshire border. It’s very difficult for small businesses to survive if the competition exists in New Hampshire. This is going to give small business people just another incentive to move.”

Opponents of the carbon fee on fuels have criticized it on process as well as substance.

Administration officials have suggested that Governor Baker may already have the authority to implement the Transportation and Climate Initiative carbon fee on fuel without consulting the state Legislature because of provisions in the state’s Global Warming Solutions Act of 2008.

DeCoste said Friday that Governor Baker should not circumvent the state government’s process on taxing and spending by joining the Transportation and Climate Initiative carbon-fee-on-fuel program without getting approval from the Legislature.