29 Mar 2017

Carbon Taxes – The best solution except for all the others

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This is part two of a three-part series regarding climate change. Part I was be published on Monday, March 27; and Part III on Friday, March 31. To view all three installments, please click here.

What’s not to like about a carbon tax?  Its backers claim it will be revenue neutral, it will place the social cost of carbon exactly where it belongs – on the consumer: “you use it, you pay for it.”  It’s not just enviros on the bandwagon – conservative columnist Irwin Stelzer, Republican poobahs George Schultz, James Baker, Martin Feldstein, Henry Paulson, Gregory Mankiw, and even Secretary of State Rex Tillerson, erstwhile CEO of Exxon, says we need a seat at the table.  Of course on the other side of the aisle, the notion of a new revenue stream, neutral or not, sets the eyes-a-blazing and the feet-a-dancing.

Here’s the nub of the Rube Goldberg contraption envisioned by Messrs. Schultz and Baker, which they label an “insurance policy.”  It rests on four pillars: a carbon tax, a carbon dividend payment, border adjustment for carbon content (read adjustment as tax) and elimination of regulations following enactment of a carbon tax. They jointly stated recently in the Wall Street Journal, “Controlling the White House and Congress means that Republicans bear the responsibility of exercising wise leadership on the defining challenges of our era.  Climate change is one of those issues.  It is time for the Grand Old Party to once again lead the way.”

They subsequently stated surprise and dismay when this recipe was not embraced.  They said, “…energy producers such as BP, Shell, Duke, PG&E, Exelon, BTE and Calpine also share an interest in a revenue-neutral carbon tax AS A WAY TO ELIMINATE STIFLING REGULATION (emphasis added).”  The key to success, they added, was to have enabling legislation provide criminal penalties for any bureaucrat who tried to divert carbon tax revenues to another program other than returning them to Americans as a carbon dividend.

Where to begin?  Set aside the wobbly premise that climate change is a defining challenge of our era.  Taxation is sure to get the rapt attention of Americans – at least the slim majority that are net payers.  It’s been axiomatic that taxation without representation is not the American model, but taxation with representation hasn’t been all that great either. At inception, most taxes are well intended, targeted and aim to respond to a societal challenge.  Property taxes fund local education, gasoline taxes (are supposed to) fund highways, bridges, and related transport needs, sales taxes fund municipal services, social security taxes were to fund retirement, medicare tax was to fund elderly health care, income tax…well…you get the idea.  Which of these has not been coopted to expanded “needs” beyond original intent?  Is there an American taxpayer that believes a carbon tax will retain its purity?

Whether it is the Schultz/Baker scheme or any other, Joe Taxpayer knows the fix is in from the get-go.  Picture, if you are able, 535 elected representatives allowing such a proposal to skate untouched through the House and the Senate.  With blood in the water, there isn’t a representative that won’t take a run at expanding it, modifying it, hanging ornaments on it, and otherwise bastardizing it into something unrecognizable and surely revenue positive to the Treasury.  Also envision if you are able, these bodies rescinding “stifling regulations” in the face of fierce (maniacal?) opposition by the environmental religionist lobby.  The Sierra Club, EDF, Earthworks, Earth Justice, NRDC and the legions of others would marshall the troops in major fundraising campaigns to take such a proposal down.

Suspend reality for a moment and assume such a contraption exists – now applying lessons of the past imagine the bureaucracy created to manage it.  This sensibly priced gradually rising tax would have to be administered and collected.  Then it would have to calculate the dividend to be paid the American public, to be paid quarterly!  Imagine a new office building in Washington, DC. Imagine the legions of “specialists” and administrators, the administrative law judges to adjudicate disputes, regional taxing authorities, border adjustment gurus, economists, legislative liaisons – all carbon life forms serving in aid of the carbon tax.  Revenue neutral = pipe dream.

Awakened from your reverie, you shudder to think that serious, well-intentioned, men of distinction could propose this or any other tax relating to carbon.  It is beyond the capacity of government in the U.S. to enact anything of simplicity or sunset much of anything that clearly does not function, as intended or not.  Witness the Obamacare debacle and the subsequent failure to repeal and replace. If the real goal is to address carbon on a global scale, the notion of a tax in the U.S. having any meaningful impact is a fantasy.

This series will conclude with Part III – A World View on Climate Change.


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