carbon tax

I argue that Republicans could actually win the environmental argument, improve energy efficiency and foreign policy issues and kneecap Democratic attempts to impose cap-and-trade by supporting the elimination of the payroll tax in exchange for a carbon tax. Not only would be good policy (the payroll tax reduces positive externalities; the carbon tax reduces negative externalities), it would take a central issue off the table for Democrats.

So I'm heartened to see a promising Republican candidate who sees the opportunity...

Instead of turning to a complex system of cap-and-trade credits to combat global warming, the country should consider a carbon tax that is “more simple and straightforward” for businesses and consumers, a Republican U.S. Senate candidate said Monday. “I’m not fooled by cap and trade,” said Rob Simmons, who is angling to unseat U.S. Sen. Chris Dodd in next year’s election. [...]

He said the government ought to “call it what it is” — a carbon tax — and take on the issue directly. Generally, most of those pushing for a carbon tax instead argue that its simplicity would prevent the need for more bureaucratic oversight, drive out speculators and offer the chance to return any taxes collected through payroll or income tax reductions.

Improve the environment, reduce congestion, reduce dependence on oil, pay less money to tyrannies, elimate the payroll tax, beat Democrats at their own game and do it all without raising total taxes at all or giving government (or industry) more control over the market? I can get onboard with that. 

UPDATE: (sigh) Never mind.  See the comment section at the news article, where the Simmons campaign manager says "Rob Simmons does not support a carbon tax. He does believe that supporters of "cap and trade" should be more straightforward about their intentions and propose a carbon tax if that is what they desire so the American people can make a clear judgment about the consequences of such a policy - a policy Rob opposes."

We could eliminate the payroll tax and take this environmental issue off the table for Democrats. But no, Republicans are content to keep the payroll tax and settle for complaining about Democrats.

Jon Henke is obviously a more astute analyst than moi, so I post this with some angst. But I think he is thinking along the lines of French military strategists after World War I,

As historians recall, France was bled dry from fighting a trench war deep in its own terrain. So apres guerre the French decided to build high tech fortifications-- the Maginot Line--along their frontier to cause the war to be fought on the German side of the border and on  French terms.

By 1940, of course, the Me 109 and the Stuka proved to be well able to fly over fortifications and destroy French forces from the air. Oops.

I fear we may be doing to same thing by trying a new and improved strategy to deal with "climate change".  Both the ambient and political climate may not be what we expect.

First, there are two central flaws with the Republicans becoming the champions of carbon taxation. First, it muddles the party's anti-tax message. It's easily trumped politically by the advocacy of economically delusional class warfare.  Instead of arguing taxes in general ought to be reduced or kept from rising, we are left bargaining over what taxes to raise. Is that an argument that is going to win elections?   

Secondly, if the carbon tax works it will generate progressively less revenue. Since I think the "starve the beast" strategy has pretty well been proved to be a failure in practice (expecting a long term libertarian control for Congress is daft) the result will be progressively higher deficits and demands to raise other taxes. While payroll or sales taxes do penalize "good" activity, they also tend to mirror the overall economy. A carbon tax intended to readjust the economy to lower carbon use will inevtiably reduce its own revenue and plants the seed to bring back other taxes.

That said, I'd rather have the efficient mechanism of a carbon tax than the crony capitalism of cap & trade. But I think we ought to reconsider whether either is inevitble.

I'm a skeptic on global warming, not a denier, but the empirical observable information in the northern US this year puts a real dent in the alarmist camp.  We have yet to see 90 degree weather in CT all summer, and this seems to be the case as well in MN. 

I'm not sure hitching our political wagon to getting huge heat waves in populated areas is so wise.   It's "An Inconvenient Truth" the salience of this issue depends on observable episodes of warm weather.

I also think the based on my read, the salience of the "climate change" issue is focused on a) younger and b) better educated voters.  I suppose a long run argument can be made to address this issue, but in 2010 we are going to be dealing with an electorate which is going to skew older.  Are we better off using limited time and resources talking to 50 year old people who are highly likely to vote than 20 year old voters who may have simply cast an Obama-mania  vote in '08? 

It may be true that the "chattering classes" may think a response on this issue is essential ( see David Cameron, UK) but the cold hard truth is we've already lost virtually every one of the high end House seats where this issue matters (WA 8 and IL 10 the visible exceptions). The low hanging fruit for Republicans in 2010 is likely to be in blue collar places like IN 9 and OH 16 where the cost is obvious and the reward speculative for enviromental legislation.

Now how are the Democrats reponding? And doesn't that say something.

My Congressman, Chris Murphy, who holds a swing seat in a blue state, voted for Waxman-Markey. And how did he justify his vote? Based on the alleged argument the bill would wean America from foreign sources of energy and the cost of inaction was too high. (hmm, open up ANWR, naw!)

As the CT Republican State Chairman pointed out in his weekly e-newsletter.     

But here is the kicker - no where in this entire letter is global warming mentioned or the need to save the polar bears or the quality of our air. In it he simply says, we must rush to placing the development of a new whole technology in the hands of the government, to decide, through taxes, who can use what fuel for what purpose. If it doesn't work out, well, at least Uncle Sam tried.

(IM: Guess it's now not so much fun being Henry Waxman's towel boy, Chris.)

  I think that Democrats have decided that the Global Warming issue is a stone dead loser in the face of the Great Recession. (Yes, the salience of the environmental issue moves in lockstep with the economic cycle).Much like the antiwar movement, this was a useful cudgel against the eveeeel Republicans, but now they are quickly losing their desire to actually have to walk the walk on taxing the crap out of everyone to "save the planet".  Looking at the climate issue through the prism of: a) the 2006 election when the economy was prosperous; or b): the 2008 election with its unusually high youth vote, may just cause us to fight the "last war"; now that we are going to be dealing with the grim economic conditions expected for 2010 and 2012.  Given our opponents were astute enough to win the last two elections, why would we benefit from picking up an unpopular issue they are now either walking or running away from? 

Republicans have fought cap and trade wrong, and they're going to lose because of it.  If the bill passes, they've lost a policy fight; if the bill fails, Republicans will not get credit for lower prices, but they will be blamed (fairly or not) for obstructing progress on environmental problems.

Let's stipulate a few political realities: (a) the public generally agrees that something must be done about climate change, (b) cap-and-trade is expensive, complicated, inefficient, unpopular, subject to industry gaming and political manipulation, (c) cap and trade is widely regarded (including by environmentalists) as inferior to a carbon tax, but (d) Democrats are pushing for cap and trade anyway, because it is "politically possible."

What should Republicans do instead?  Propose a carbon tax. 

But, instead of a straight tax increase (as Democrats want), Republican should propose a carbon tax that replaces the payroll tax.   That is revenue neutral, meaning there is no total tax increase.

There are many reasons this works.

• Environment: Republicans would be offering the most pro-environment solution to climate change. 
• Cost: A Carbon-for-Payroll tax would address the climate change problem without imposing any additional tax on Americans (unlike cap and trade).
• Externalities: The payroll tax disincentivizes positive externalities - labor and employment.  The carbon tax disincentives negative externalities - congestion, pollution, greenhouse gas emissions/climate change, dependence on foreign oil, money sent to tyrants and enemies, foreign debt, the trade deficit, price volatility.
• Tangibility: A carbon tax is a consumption tax (e.g., a gas tax), which consumers feel in a tangible way and can adjust behavior to optimize their exposure to the tax. Payroll taxes is money they never see, so the cost is much less noticed.  The more sensitive the public is to the price they're paying for government, the more rational they will be about government spending.

Finally, the key: The idea of swapping the payroll tax for a carbon tax was proposed by....Al Gore.  So you've got a coalition composed of environmentalists, foreign policy hawks, the Chamber of Commerce (and businesses in general), Exxon, the auto industry and Republicans who want to stop higher taxes.

Republicans should be offering The Al Gore Amendment to every piece of energy/environment legislation in sight.  And if Democrats oppose it, then the burder is on Democrats to explain why they refuse to support the most pro-environment and pro-economic growth proposal to address climate change.

That's good policy and good politics.

Yesterday was a slow day at the office, so I spent a lot of time on the I-phone seeing if we could actually give the lefties a shiner by defeating their "cap and trade" fiasco.

Then I got home, saw the result, and traded e-mails with various people in the "movement" The kindest response to the eight turncoats that enabled Waxman-Markey to pass was roughly along these lines

I don't think one can minimize why this was a truly hideous vote for those eight folks. Here we had a chance to derail the Obama socialism train and restore the Republican party to policy relevance, and these guys bailed out so they could get a nice mention in the NY Times tomorrow. Swell.  Even the White House is giving up on the "global warming" issue and you guys sign up for the mission.  Putzes,

The immediate response that I had was that the kindest thing to do to these "fredos" was to throw them out on an ice floe with the polar bears. And others were along those lines. Or at least, shut off their campaign money, demand retirements, or find primary challengers  But that's my spleen talking. Today my brain took over.

No. it's time for a more "reasonable" approach.

See we now have an even more serious threat to the future of the Republic, and that would be a socialized health care system. I'll let John Hinderaker explain.

One of my law partners asked me yesterday which of the Democrats' current initiatives is worse, the tax on carbon or the health care "public option," otherwise known as socialized medicine. I replied unhesitatingly that socialized medicine is much worse. Carbon tax-and-trade can rather easily be repealed once people realize what a dumb idea it is. However, once our health care system has been destroyed and replaced with "single payer" socialized medicine, there is no going back

We need to explain to the Octofail Republicans that there is only one way out of the flaming pit they have dug for themselves. They need to become hard line zealots against the "public option" health care "reform".

And not milquetoast statements and a quiet vote "nay" on final passage. I mean going medieval on the whole concept 24/7/365. I mean like righteous 100 decible opposition. I mean like Rudy Giuliani vs. squeegee men or Michael Moore v. the Hometown Buffett bad.

Anything less, and we re-send the pink slips with no remorse and no reconsideration.

Now for our political geniuses.  First off, let's dispense with the "socially liberal, fiscally conservative" canard here. This was a statist bill from the word go and there wasn't a libertarian idea within the same zip code. It was simply an energy tax.  Ok if you want to keep the government out of my bedroom. How about letting people afford to heat their bedrooms? 

Second, this bill is going to appeal to the vocal but few Saab Socialists who put the environment ahead of the economy. It is going to be painfully unpopular with blue collar America. Maybe Dave Reichert's uber green district will like it; but if Mark Kirk or Mike Castle think this isn't going to backfire on them big time in Rockford and New Castle they are going to find the Democrats whacking them with their own bill next November.

And please explain Mary Bono Mack.  Both her and the lame hubby from SW FL are painful underachievers, proving surnames don't equal leadership. (Something we know well in CT!)

So that's the offer.  Back before he went girlie man in Sacramento Arnold Scharzenegger told John Connor this

Come with me if you want to live

Well, "Cap and Tr8-ors".....either make sure Obama's health care reform fails...or

Hasta la vista, baby!

Barack Obama's budget proposal pays for a healthcare plan -- we don't know yet what the plan is -- with a carbon tax. Really.

Obama's budget proposes a health care reform fund that would cost $635b over 10 years. Obama also proposes a cap-and-trade system that would generate $640b in revenue over 10 years.

So Obama wants to fund universal healthcare with a tax on carbon, wtih some administrative stuff on the other side to make the tax more complicated and harder for business to negotiate.

It is worth putting this in comparative perspective. Al Gore and the Liberal Party of Canada both had proposals for a carbon tax.

Gore proposed replacing the payroll tax with a carbon tax. The Tax Foundation noted Gore's striking language at the time:

Former Vice President Al Gore has a novel approach for dealing with global warming: tax carbon dioxide emissions instead of employees’ pay.

“Penalizing pollution instead of penalizing employment will work to reduce that pollution,” Gore said Monday in a speech at New York University School of Law.

The carbon tax would replace all payroll taxes, including those for Social Security and unemployment compensation, Gore said. He said the overall level of taxation, would remain the same.

Obviously, this never came to a vote, but the idea has garnered some significant intellectual support. George W. Bush's Chairman of Economic Advisors, Greg Mankiw, supports a stimulus that would replace the payroll tax with a gasoline tax.

In a meaningful sense, using the revenue to create universal healthcare is signficantly to the left of using it to lower the tax burden of all Americans.

Contrast it with the proposal of the Liberal Party of Canada, which proposed the "Green Shift", moving into the last election:

At the heart of the energy plan is an energy tax on carbon fuels, which will be based on consumption.

New taxes are expected to generate about $15.4 billion annually in revenue in four years. But the Liberals say their plan will be revenue neutral because it will cut income taxes and increase family support payments.

Dion said his plan is "as powerful as it is simple."

"The Liberal Green Shift will cut taxes on those things we all want more of -- such as income, investment and innovation -- and shift those taxes to what we all want less of: pollution, greenhouse gas emissions and waste."

However, the Conservative Party of Canada successfully branded this idea, the "permanent tax on everything", and this issue was part of the reasons that the LPC lost the most recent election there and Stephane Dion, its primary advocate, was forced to step down as party chair.

So let's make this really clear. Obama's plan is significantly to the left of something that failed miserably in Canada. How's it going to play in the states?

As always, Newt Gingrich is leading the way on messaging:

"Let me get this straight," said Gingrich. "We're not going to raise tax on anybody making under $250,000 a year unless you use electricity. And we are not going to raise taxes on anybody under $250,000 a year unless you buy gasoline. And we are not going to raise taxes on anybody who makes under $250,000 a year unless you buy heating oil. And we're not going to raise taxes on anybody who earns less $250,000 a year unless you use natural gas."

"And I try to think to myself," he added, "even in the left wing of the Democratic Party, where there are some people who are fairly unusual, how many of them don't use heating oil, natural gas, gasoline or electricity?"

If Obama is lying like this, and the left couldn't win a fight significantly to the right of this one in Canada with a significantly healthier economy, I think that we can win this fight here.

Recently, there has seemed to have been a shift in the international tenor of the environmental debate. The nomination of John McCain made the Republican Party the last major center-right party in the world to embrace some sort of affirmative strategy to effect global warming. (about mid-way through the previous government, the Conservative Party of Canada switched their position, and in the last unfortunate election, the Liberal Party of Australia, a huge producer of coal, also switched their position)

At the time, there was a little victory jig. However, two things have no happened that are putting a damper on the watermelons (green on the outside, but red on the inside)

First, the Drill Here, Drill Now movement in the United States has gotten international attention. Last month, I was at a conference of European center-right parties. People were aghast at what Newt and crew were up to. Left leaning academics who had been with Democrats told them that the hope of a Kyoto-style agreement in 2012 was understood to be over.

The second is likely to be the Canadian election. There's a telling piece in today's Telegraph-Journal, a Canadian paper. John Williamson, from a Canadian free-market think-tank, notes several things that came from the election:

Dreams of a carbon tax are dashed now, although few environmentalists will publicly say so. More likely, they will soon assert the messenger failed, not the carbon tax idea. But of course, we know this is bunk. The Liberals campaigned unequivocally on a revenue-neutral carbon plan to save the planet. It was soundly rejected.

The policy itself, not Mr. Dion's egg-headed intellectualism, was the political albatross. Long before the campaign was underway, the Liberal Party's own pollster was warning that the public was not buying the so-called Green Shift. A leaked memo from Michael Marzolini on April 29 was unequivocal: "It was our recommendation that if a carbon tax shift absolutely must be part of our platform - and we do not recommend this at all - that it only be part of a larger environmental strategy involving actual popular proposals." His forecast: "Making a carbon tax shift the key plank in our appeal to the electorate is a vote loser, not a vote winner."

A British journalist getting a briefing on the election got the message:

At a breakfast sponsored last week by the Canadian High Commission in London to discuss the election results, one British journalist astutely observed that the rejection of the tax by voters of a G7 nation could have consequences for the climate change debate. Despite all the scare-mongering from the United Nations and hand-wringing about an alleged "scientific consensus," Canadians nonetheless refused to swallow the tax. If courteous Canadians (that's how Europeans view us) are willing to say "no thanks" to elite opinion-makers, might not voters in other democracies?

With respect to paying more for energy, Canada found its voice in the global warming debate. It certainly wasn't the one environmentalists envisioned when the carbon tax was proposed.

One should also point out that the clarity of this message cannot be understated. If not for the economic troubles that emerged late in the Canadian campaign, the Conservatives would likely have won a majority, potentially reducing the Liberal party to a third-party status.