Archive for the ‘Tax policy’ Category

Battle lines forming on carbon tax

Tuesday, March 12, 2013 by:Carolyn Lochhead
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For a political non-starter, a carbon tax is generating an awful lot of activity on Capitol Hill. On Wednesday, the conservative Republican Study Committee is holding a press conference to slam the idea, headlined by Texas Reps. Joe Barton and Jeb Hensarling and Louisiana chair Steve Scalise, with star billing to anti-tax activist Grover Norquist.

A bevy of fossil-fuel industry representatives and conservative activists such as Myron Ebell, who runs the climate skepticism activities of the Competitive Enterprise Institute “will discuss harmful impacts of a carbon tax on American families and small businesses” and “unveil a resolution opposing efforts to implement a national carbon tax.”

The National Association of Manufacturers weighed in with a study claiming that a carbon tax would devastate the economy. The study omits the rising cost of droughts, floods and hurricanes.

It’s all very peculiar given that White House spokesman Jay Carney dismissed the idea last November: “We would never propose a carbon tax, and have no intention of proposing one.”

What’s catching people’s attention is the “fee and dividend” carbon tax that is remitted back to consumers as a big check each year, based on Alaska’s Permanent Fund. Sen. Barbara Boxer (D-CA) is co-sponsoring a version with Sen. Bernie Sanders (I-VT); former Secretary of State and Treasury George Shultz, a Californian who served under Ronald Reagan, promoted the idea on Capitol Hill last week. NASA climate scientist James Hansen is also a huge backer, saying that putting a price on carbon may be the only way to prevent catastrophic climate change.

Economists favor a carbon tax over cap-and-trade as more efficient and transparent; it’s also a consumption tax that economists tend to prefer over income and investment taxes. Adele Morris at the Brookings Institution argues that a “modest” carbon tax could help reduce the deficit, and that Republicans ought to consider it as a market-based alternative to President Obama’s vow to regulate C02 emissions from existing power plants. The idea is gaining traction among conservative economists, who see it as a way to cut the corporate tax rate, including former Bush adviser Greg Mankiw.

On Tuesday, Rep. Henry Waxman, D-Los Angeles, the architect of the failed cap-and-trade legislation of Obama’s first term, issued with several other members a discussion draft of a carbon tax. Under their plan, “All revenue generated by the carbon pollution fee should be returned to the American people,” although the authors do not seem to be considering a straight transfer.

Even China is now proposing carbon taxes. Part of the problem with reducing U.S. C02 emissions is that it would impose high costs on U.S. industry, making U.S. companies uncompetitive globally and inducing a further shift of manufacturing to China. But most new versions of the tax, including Boxer/Sanders, would include a border tariff on the carbon content of imports that is equivalent to the tax. That would create a big incentive for exporting countries like China to impose their own carbon tax so as to keep the revenue.

Opponents clearly think the idea is gaining traction and want to stop it before it gets too far.

Barbara Boxer pushes forward on “planetary emergency”

Thursday, February 14, 2013 by:Carolyn Lochhead
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Sens. Barbara Boxer, D-Calif., and Bernie Sanders, I-Vt., formally introduced their fee-and-dividend climate bill Thursday,as you learned here Wednesday.

The press conference featured several environmental activists who were arrested at the White House Wednesday, part of a push for a big climate rally in Washington Sunday. Also on Thursday the Government Accountability Office added climate change to its “high risk” fiscal issues that threaten big costs to taxpayers.

Bill McKibbon, founder of 350.org, is predicting 20,000 demonstrators on the mall Sunday. Many are arriving from San Francisco, pressuring President Obama to nix the Keystone pipeline as comrade Garofoli has been documenting.

The fee-and-dividend idea is a clever twist on a carbon tax, putting a price on carbon at its source and rebating most of the money back to U.S. residents. Modeled on Alaska’s “permanent fund” that rebates oil royalties to Alaska residents, the idea has been promoted by McKibbon and NASA climate scientist James Hansen. The Boxer/Sanders bill is not quite so clean, as it uses a big chunk of money to invest in green technologies, but the idea is the same.

The fee-and-dividend idea offers a way around the political and distributional obstacles of a carbon tax. A price on carbon is widely considered essential to reducing greenhouse gas emissions, and is much simpler and more transparent than the cap-and-trade legislation Boxer sponsored in 2009. A carbon tax has potential appeal to conservatives, at least conservative economists, as a market based approach to reducing climate pollution, as well as to tax reform. A carbon tax is a consumption tax, which economists generally prefer to taxes on work, savings and investment.

D.C. think tanks have been working overtime on the idea. That includes the conservative American Enterprise Institute. Former Rep. Bob Inglis, a South Carolina Republican, is crusading for the idea, at a new think tank, the Energy and Enterprise Initiative, at George Mason University.

Alex Bozmoski, director of strategy and operations for Inglis’s Energy & Enterprise Initiative, said it is “refreshing that Democrats are moving past cap-and-trade” but criticized the Boxer/Sanders bill as loaded with new renewable energy spending and “bloated government, and that is a fatal flaw for conservatives.” A better idea, he said, would be to offset the new revenue from the carbon fee with dollar-for-dollar cuts in other taxes and leave it to the market, incentivized by the carbon tax, to figure out how to cut emissions.

Sanders scored big by getting Boxer’s buy in. Boxer said she will push the bill through the Environment and Public Works Committee, which she chairs, holding hearings by spring and a markup in summer.

Boxer also said Republicans will not be able to stop the EPA from imposing new CO2 regulations on existing power plants because the Supreme Court has ruled that the agency must act on greenhouse gas emissions under the Clean Air Act.

Boxer cited climate scientists who briefed the committee Wednesday warning that major American cities such as San Francisco, New Orleans, Boston and Atlantic City will be under water this century if emissions continue on their current course. Among other things. Boxer called the situation a planetary emergency.

Sen. Barbara Boxer throws weight behind carbon fee

Solar chief argues for natural gas exports

Thursday, January 10, 2013 by:Carolyn Lochhead
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With a huge fight heating up over whether to allow exports of U.S. natural gas, California solar executive Arno Harris argued that allowing exports would help the solar industry and reduce global carbon emissions.

The U.S. shale-gas boom (fracking) has up-ended global energy markets, lowering energy costs in the U.S. and promising to make the U.S. a net energy exporter, instead of a dependent on Middle East oil.

Cheap natural gas “is wiping coal off the map,” said Harris, CEO of San Francisco-based Recurrent Energy, which builds large-scale solar plants that sell electricity to utilities.

That’s a big plus for climate change, because natural gas has about half the carbon emissions of coal. But cheap natural gas also threatens to undercut green energy.

But Harris argued in an interview that solar costs are plummeting too, and that the industry can remain competitive.
“Everybody knows we’re in this cheap gas environment,” Harris said. “Gas-fired electricity today is probably five cents or six cents per kilowatt hour, wholesale.” But new solar plants that Recurrent Energy is building will sell power to utilities as low as seven cents a kilowatt hour, he said.

“There’s no longer this giant gap like there used to be a few years ago,” Harris said. “What Americans aren’t aware of is in fact how narrow that gap gotten, just as gas is at historically low prices, wind and solar are at historically low prices as well.”

Gas exports are a rare case where Republicans and the Obama administration agree. The Dept. of Energy set off a ruckus with a study saying gas exports would provide a “net economic benefit” to the United States. Sen. Ron Wyden, D-OR, called foul. Democrats want to keep gas prices low. Environmentalists oppose exports because they oppose the fracking that allows the gas to be reached; they also fear that low gas prices will undercut cleaner energy.

Harris favors gas exports because they could help boost the price of gas, making solar and wind more competitive.

“I’m making the argument to my friends in the environmental and climate community that they shouldn’t make this knee jerk reaction about exported gas,” Harris said. “In fact export of gas is the best step we can take to bring order back to energy markets and raise the price a little bit.” Gas has gotten so cheap that utilities are under intense pressure to build gas turbines and decrease their use of renewables.

U.S. natural gas exports could also reduce U.S. exports of coal to Europe, Harris argued.

Paradoxically, the U.S. gas boom has encouraged coal exports to Europe, where U.S. coal is cheaper than natural gas from Russia, which controls most of the gas supply to Europe. The price shift has made it more difficult for European countries to meet their carbon emissions targets.

“That coal is still coming out of the ground, it’s just all going to Europe,” Harris said. “They are switching from Russian gas to American coal, so overall, even though we’re keeping the natural gas here, it is still resulting in a big uptick in carbon emissions because we’re still pulling all that coal out of the ground. We’re just not burning it here.”

Harris is on the board of a new trade group, AEE, or Advanced Energy Economy, which wants to add a pro-business voice to counteract forces who argue that alternative energy is not viable without subsidies. (Harris argued that fossil fuels are “all permanently subsidized in the permanent tax code” as opposed to temporary breaks for renewables.)

There’s a lot at stake in the coming fight over corporate tax reform, although more may be happening in state legislatures. California’s incentives, including its renewable portfolio standard that requires utilities to use green power, drew the solar industry to the state, and the AB 32 climate change law is being closely watched worldwide.

(National Journal argued that with AB 32 Arnold Schwarzenegger has done more to combat climate change than Al Gore or President Obama.)

New utility additions

Van Hollen: Boehner stringing out ‘fiscal cliff’ talks because of GOP politics

Wednesday, December 12, 2012 by:kyle.campbell@chron.com (Kyle Campbell)
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With less than three weeks until the U.S. economy falls off the so-called “fiscal cliff,” the top Democrat on the House Budget Committee said Congress needs to act quickly to beat the deadline.

But he’s not holding his breath.

“I would say you’ve certainly got to get something by Christmas if you want to practically get it done by the end of the year,” Rep. Chris Van Hollen, D-Md., said, adding that, ideally, some outline should be in place by the end of the week to prevent negotiations from spilling over into the holiday season. “I don’t assign a high probability to the end of the week, but I do assign a high  hope.”

Van Hollen addressed members of the media at a breakfast organized by the Christian Science Monitor this morning at the St. Regis Hotel in Washington, D.C.

During the breakfast, Van Hollen said  House Speaker John Boehner might have to bring a plan to the table that could pass without majority support from the Republican caucus — something he has been unwilling to do in the first two years of his speakership. Van Hollen expressed concern as to whether Boehner, an Ohio Republican, would make such a move before the official vote for his re-election as House Speaker on Jan. 3.

Moving forward without support from a majority of a Republicans in the House would violate the “majority of the majority doctrine,” a recent Republican governing principle that says the Speaker of the House won’t move forward with an action if it doesn’t have the support of a majority of GOP lawmakers, even if it has the backing of a majority of all House members.

This is also referred to as the Hastert Rule, named after former speaker Dennis Hastert, R-Ill., who pioneered the practice.

“I’m getting increasingly concerned that one of the reasons why the speaker has decided to string out these discussions is that he wants to wait until Jan. 3 when the election for Speaker takes place,” Van Hollen said. “He’s concerned that any agreement he reaches, if it violated the so-called Hastert Rule, could undermine for him and his caucus and would make it more difficult for him Jan. 3.

“I would hope he would be the interest of getting an agreement before House Republican politics.”

Van Hollen said he believes Congress will pass the tax cuts on middle income families before the end of the year, which he estimates will solve many  of the most crucial aspects of the so-called fiscal cliff.

“The biggest tax increase happens if we do nothing,” he said.

Obama takes to Twitter to talk (or tweet) fiscal cliff (VIDEO)

Wednesday, December 5, 2012 by:jana.kasperka@chron.com (Jana Kasperkevic)
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Just in case you did not believe that it was, in fact, President Barack Obama who responded to public’s questions regarding the fiscal cliff and #My2K on Twitter this past Monday, the White House released the following video:

Were your fiscal cliff questions answered during the White House Twitter chat? Find out here.

Dianne Feinstein willing to look at mortgage interest deduction

Tuesday, November 27, 2012 by:Carolyn Lochhead
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Oakland Hills: The bigger the house, the bigger the deduction

Even as we watch the spectacle of Republicans throwing anti-tax activist Grover Norquist under the bus (it started the day after the election with House Speaker John Boehner putting revenue on the table), some Democrats are eying other sacred cows.

In a telephone interview before her re-election, Sen. Dianne Feinstein said she would support scaling back the mortgage interest deduction — the most revered bovine of all — to help reduce the deficit.

The California Democrat said Congress should use the Bowles Simpson framework to attack the fiscal cliff, giving the Finance Committee time “to work out which deductions” should be trimmed to raise revenue.

“For example, nobody is going to want to take the interest deduction from someone’s first home away,” Feinstein said. “Maybe second, third, fourth, fifth” house though. “You have to look carefully at things like child tax credits, the AMT (alternative minimum tax) has to get fixed, probably the R&D tax credit should continue, the doc fix (perennial roll back of slated cuts for Medicare providers).”

The immense popularity of the mortgage interest deduction among the hoi polloi is perplexing given the distribution of its benefits. These are heavily concentrated in a handful of pricey, heavily Democratic cities including San Francisco.

Here’s from our Sept. 4, 2011 story:

Just three metro areas – greater New York, Los Angeles and San Francisco – receive more than 75 percent of the subsidy, according to a 2004 study by economists Todd Sinai and Joseph Gyourko. Mortgaged homeowners in the San Francisco and San Jose region receive $4.6 billion a year from the McMansion tax break, according to a study by John Burns Real Estate Consulting in Irvine.

The tax break is available to anyone who borrows up to $1 million for a mortgage – including for a vacation home – or takes as much as $100,000 in a home equity loan. The bigger the mortgage and the higher one’s income, the bigger the deduction. A person in the top tax bracket of 35 percent who borrows $1 million can get a tax break of $17,500. That’s on top of a slew of other subsidies such as preferential capital gains taxes on the sale of a primary residence, deduction of local and state property taxes, and subsidies to mortgage giants Fannie Mae and Freddie Mac.

By comparison, households earning less than $75,000 get less than $200 in savings from the deduction. More than three-fourths of taxpayers do not itemize, and so don’t claim the deduction at all. Those who rent or have paid off their mortgages, most of them seniors, get no benefit.

Californians receive 2 1/2 times as much in mortgage interest deductions as Texans, and have for decades. Residents of the Dakotas, Mississippi and Arkansas regularly receive among the lowest share of benefit. McAllen, Texas, mortgage holders get about $23 million a year from the deduction, but Petaluma and Santa Rosa homeowners get more than $300 million, according to the John Burns Consulting study

If you have a better idea, here’s a handy online way to set your own priorities. Here’s another, along with a wealth of ideas here and here.

Big buzz on carbon taxes

Tuesday, November 13, 2012 by:Carolyn Lochhead
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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.

Stale debate on tax rates has diminishing returns

Wednesday, October 17, 2012 by:Carolyn Lochhead
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Republican Ronald Reagan and Democrat John F. Kennedy, icons of their parties, both called for lower income tax rates to boost growth. The GOP has not let go of the idea since. Nor has President Obama, who despite calling for a higher tax rate on high earners, would preserve the vast bulk of the 2001 and 2003 Bush tax cuts.

But as Mitt Romney said of George W. Bush last night, that was a different time.

In 1960, when Kennedy was elected, the top income tax rate was 91 percent. In a 1962 speech to the Economic Club of New York, Kennedy said:

“Our present tax system, developed as it was, in good part, during World War II to restrain growth, exerts too heavy a drag on growth in peace time; that it siphons out of the private economy too large a share of personal and business purchasing power; that it reduces the financial incentives for personal effort, investment, and risk-taking.”

In 1980, when Ronald Reagan was elected, the top tax rate was 70 percent, still clearly a drag on growth. Reagan lowered the top rate to 50 percent. He ultimately got it reduced to 28 percent by 1988. But he only achieved that through his landmark 1986 tax reform, negotiated with Sen. Bill Bradley, a New Jersey Democrat.

The current top rate is 35 percent. But tax breaks have mushroomed. The government will dole out tax breaks of more than $1.1 trillion by 2014.

Obama has taken little if any initiative on tax reform. Romney promises tax reform, and has a credible idea, borrowed from Harvard economist Martin Feldstein, and New American Foundation fiscal director Maya MacGuineas, to limit the total amount of deductions a taxpayer can claim. The plan cleverly avoids the nearly impossible political challenge of eliminating hugely popular deductions and exclusions for mortgage interest, health insurance, municipal bonds, and the like.

But it is highly unlikely that Romney can get the revenue he needs to cover an across-the-board tax cut and increase in military spending by this reform. That does not diminish the merit of a limit on tax deductions. It is much more politically feasible than the “zero plan” by Bowles Simpson which dramatically lowers all rates by eliminating tax breaks.

If Obama would take tax reform more seriously, instead of clinging to the Bush tax cuts, and if Romney would be more realistic about the revenue needed to fund Medicare and the rest of the government, instead of clinging to a Reagan policy enacted when tax rates in fact were confiscatory, maybe we could get somewhere.

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