Carbon tax bills are the talk in DC these days. There is marginal bipartisan support for enacting a new tax. Enacting a carbon tax will impact American families and businesses. Bipartisanship doesn’t make it good policy. A principled tax system is the way to promote prosperity for its residents. It should advance a government’s economic interests.
Tax policy considerations…
The proper function of taxation is to raise money for core functions of government. It is not to direct the behavior of citizens. It is not to close budget gaps created by overspending. This is true regardless of the size or level of government.
Different carbon tax models and prices have been proposed. All of the proposals tax activities that emit carbon dioxide. The tax rests on the premise that emissions are responsible for global warming. The political rationale is that this is a cost to society not otherwise accounted for. The proposals are intended to address this market failure with a tax policy. An unintended consequence could well that it may lead to economic failure.
Taxation always imposes some level of burden on economic performance. That harm can be minimized if policymakers resist the temptation to use the tax code for non-tax purposes. Purposes such as social engineering, class warfare and other extraneous purposes.
The Family Plan…
Families would pay more at the meter and the pump. Approximately 80% of America’s energy needs are met by natural gas, oil, and coal. This means the costs would be economy wide. It would cost more to manufacture, which would drive up the price of manufactured goods. And it would cost more to farm, which would drive up the costs of food.
Analysts using the U.S. Energy Administration Information’s energy model to estimate carbon tax effects. They assumed a desire to reduce carbon dioxide emissions as aggressively as possible. They chose a time frame between now and 2040.
According to the model’s results, a carbon tax would cause:
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A peak employment shortfall of more than 1.4 million jobs.
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A total income loss of more than $40,000 for a family of four.
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An aggregate gross domestic product loss of more than $3.9 trillion.
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Increases in household electricity expenditures of 12% to 124%.
The burden would be heaviest on low-income families. They spend a higher portion of their budget on energy costs. Some carbon tax proposals acknowledge this. Others do not. When they do they use tax rebates to attempt to mitigate impacts on target groups.
But at least its complex and not transparent…
Accepting that a rebate check compensates low-income families for their higher energy bills. What it does not do is undo the damage they’ll incur from paying more for everything they buy. Groceries, clothes, health care, and everything else they buy will cost more. That is true because of the increased cost of energy for all those providers. That means our standard of living should be expected to be noticeably reduced.
Some supporters talk of returning the tax revenue to the people. This leaves one has to wonder why not simply not enact the tax? But of course, the socialists need to take some kind of cut of our money for their special interests. Call them green energy projects or new infrastructure.
Do we really want unelected bureaucrats messing with our taxes?
There are fundamental principles which provide guidance for a neutral and effective tax system. Such a system raises needed revenue, for core functions of government. Most importantly it minimizes the burden on citizens. Those principles include, transparency, simplicity, economic neutrality, equity and fairness, reliability and they should be complimentary with the tax systems of other levels of government.
Then there’s the bureaucratic nightmare of implementing a new tax. Supporters acknowledge that a carbon tax would harm American businesses and U.S. competitiveness. They suggest enacting a border adjustment tax. That imposes a tax on imported goods from countries where no carbon pricing exists. Others propose to eliminate environmental regulations in exchange for a carbon tax. That begs the question: Are they needed at all if they can be bartered for tax dollars?
Administering border taxes on goods would be enormously complex. It requires an estimate of the tax-equivalent value of the given policies under examination. The fourth branch of government would be empowered to use tax policy to make decisions micromanaging the economy. That is a bad, bad idea. That transfers tax authority to unelected bureaucrats.
Oh, by the way, will it make a difference in climate change?
Supporters argue a carbon tax is worth it despite the costs. Okay, accepting that assumption: How much would it do much to benefit the climate? As far as is determined so far it’s not clear it will do anything besides reduce the standard of living for every American.
No doubt, carbon dioxide emissions would decline. If you tax something, people will use less of it. But the impact on global temperatures would be negligible. By the end of the century, even if you assume the most catastrophic scenario, no one will notice.
Is the cure worse than the disease?
It’s also highly unlikely a carbon tax could be applied to everyone. Various interest groups will influence which businesses are subject to the tax. Other countries are likely to implement alternative policies. Their policies might subsidize solar and wind energy instead of taxing carbon.
Carbon taxes are a cure worse than the assumed disease. They have a minimal impact on emissions. Almost nothing they will do affects climate change. Carbon taxes hurt the citizens supporters intend to help. Carbon tax targets certain groups.
As Tax Policy, Carbon Tax SUX…
Use of the tax system to pick winners and losers in society is unfair. Unfairly shifting the tax burden onto or off of one class of citizens or another is just wrong. Tax systems should be accountable to citizens. Taxes and tax policy should be visible and not hidden from taxpayers. Do you remember what the constitutionally enumerated core functions of government are?
