The Washington policy machine is all atwitter with the idea that the carbon tax’s time has come. It is an elegant three-run homer that would tackle climate change, tax reform and the budget deficit in one fell swoop. It would meet the conservatives’ quest for consumption taxes, the liberals’ quest for new revenues and the economist’s quest for market efficiency.
Some of the biggest policy players in Washington are holding an all-day event on carbon taxes today, sponsored by the liberal Brookings Institution and the conservative American Enterprise Institute, with co-sponsorship by the International Monetary Fund and the non-partisan Resources for the Future. Here’s a list of RFF’s papers.
This modest proposal, to borrow from Jonathan Swift, has so alarmed Grover Norquist that he has launched a counter-offensive. Norquist’s Americans for Tax Reform (should we add “not” before “for”?) vowed to “work tirelessly” against any carbon tax because it “not only opens up a new revenue stream for proponents of big government, but threatens to forever damage the American economy.”
Conservative cavalry has arrived from the Competitive Enterprise Institute, which has filed a lawsuit “to force the Treasury Department to release more than 7,300 emails believed to discuss a new ‘carbon tax’ Obama administration allies in Congress are expected to propose in the upcoming lame duck session.”
Obviously, a carbon tax would address climate change much more efficiently than any cap-and-trade scheme that attempts to put a price on carbon but gets tangled very fast in industry/political maneuvering, ala the House bill that died in Obama’s first term. California launches its landmark cap and trade auction Wednesday. A carbon tax also would raise revenue that could be used to reduce the deficit and/or lower income taxes. Conservative economists have long argued that income taxes punish work and savings and that taxes on consumption are preferable.
Rob Atkinson, president of the Information Technology and Innovation Foundation, a non-partisan think tank, told us today that there’s an even simpler first step sitting right in Washington’s lap. It’s called the gasoline tax and it hasn’t been raised since 1994. Atkinson calculates that the gas tax, now at 18.4 cents a gallon, costs Americans about one third as much as it did when it was enacted in 1994, given inflation, increases in fuel economy and rising incomes.
But it never gets raised no matter how many hurricanes annihilate New Jersey and Long Island, no matter how many bridges fall down and no matter how big the debt burden on the next generation, because Democrats and Republicans, reflecting public sentiment, view the gasoline tax as the next worst thing to child bondage.
House Speaker John Boehner, R-Ohio, gave a pretty hard shove to Norquist the day after the election when he abandoned the stand that tax reform be revenue neutral. That was a huge give that has opened the door in Washington to a new grand bargain. Every interest group in town is maneuvering as we speak.
