Florida Congressman Carlos Curbelo is getting ready to introduce a bill repealing the gas tax in exchange for a carbon tax. It seems rather odd the Miami Republican wants to chart this path, especially after the House GOP overwhelmingly denounced the notion of a carbon tax last week, but Curbelo isn’t backing down from his proposal. He told Miami Herald his proposal is just a “first step” in the discussion.
When you ask this question in a vacuum, is any tax detrimental to economic growth? It’s usually going to be yes…But when you put it in context and you show how [a carbon tax] can be a component of a broader policy that is focused on winning the future, then it makes a whole lot more sense…
We wanted to make it as fair as possible and that’s why we repeal the gas tax. This is not about punishing consumers or punishing producers, it’s about making sure that we can hand off a clean, healthy planet to future generations while being sensitive to economic realities.
Curbelo vows he’s got GOP co-sponsors, so it will be quite interesting to see exactly who is signed onto the proposal. My guess is it probably includes five of the Republicans who voted against the no carbon tax resolution last week. He did get praise in National Review for his attempt, with Reihan Salam calling it a “quirky, innovative approach” but criticizing the size of the tax.
There are more conservative supporters of the idea of a carbon tax, including R Street Institute’s Josiah Neeley. Neeley opined in The Texas Tribune earlier this month a carbon tax can be conservative, if it falls along certain principles. The first two are the idea only companies who produce carbon emissions will actually have to pay the tax i.e. “personal responsibility” (his words, not mine), coupled with encouraging innovation.
While there are many unknowns in the climate debate, the fact that carbon emissions pose risks is hard to deny. According to a statement unanimously signed by members of the Atmospheric Sciences Department at Texas A&M, greenhouse gas emissions are very likely making the planet warmer, and “continued rising temperatures risk serious challenges for human society.” Unlike the environmental left, which seeks to end all use of fossil fuels, a carbon tax would simply keep emitters from imposing the costs of their actions on non-consenting third parties…
(P)utting a price on carbon would provide a powerful incentive for businesses and entrepreneurs to find cheap, cleaner ways to use energy. That might mean increased use of zero-carbon energy, like nuclear power or renewables. Or it might mean new emissions-control technology that would allow continued use of fossil fuels without adding greenhouse gases to the atmosphere. Give American innovators a price signal and watch them create and sell technologies that make clean energy more abundant and affordable. Then watch the ripple effects stoke decarbonization and end energy poverty. Many businesses themselves recognize this logic; ExxonMobil, BP, Shell, First Solar, Exelon, Proctor & Gamble, Johnson & Johnson, and General Motors all support an emissions fee for greenhouse gases.
Neeley continued his defense of a carbon tax by likening to a sin tax and swearing it won’t grow government.
(W)hen you tax something, you discourage it. With the current taxes on income and capital gains, Americans get less of what they want more of — in this case, work and investment. Revenue from a carbon tax could be used to cut or repeal these taxes, thereby encouraging greater economic prosperity. Such “tax swaps” have been a key feature of major conservative tax reforms, from President Ronald Reagan’s 1986 tax overhaul to last year’s Tax Cuts and Jobs Act. Economic analysis suggests that using carbon tax revenue to offset more burdensome taxes would boost gross domestic product even before considering any environmental benefits. Arthur Laffer, President Reagan’s economics adviser, calls such a tax swap “a no brainer.”
Finally, a carbon tax is a way to address the risks of climate change without growing government. Whether the government returns revenues to Americans in the form of a tax swap or as a cash dividend, a carbon tax need not grow government. In fact, it could shrink it. Federal and state governments spend billions in subsidies and impose billions in regulatory costs through mandates designed to reduce greenhouse gas emissions. With a revenue-neutral carbon tax, many of these subsidies and mandates would become redundant.
These defenses don’t make sense.
A reminder to Neeley – who is much smarter than I’ll ever be – a tax (much like a tariff) will be passed down to its consumer. Oil and gas companies would be able to avoid taking any hit in the wallet by increasing prices, as would automobile makers. The notion they wouldn’t is rather ludicrous and something David Ricardo noted in The Principles of Political Economy and Taxation when he wrote, “We have already seen, that the effect of a direct tax on corn and raw produce, is, if money be also produced in the country, to raise the price of all commodities, in proportion as raw produce enters into their composition, and thereby to destroy the natural relation which previously existed between them.” There is nothing stopping ExxonMobil or Ford from doing the same.
I can understand why the idea of a tax swap seems appealing, yet I’m reminded when Arizona temporarily raised the sales tax in 2010 to avoid budget cuts. Then Governor Jan Brewer attempted to make the tax permanent, despite swearing she opposed the notion, only to have it rejected by voters in 2013. The government wants to soak up as much money as possible. It’s safe to say Congress would probably find some reason to bring a gas tax (or any other repealed tax) back, under the idea it would pay for one program or another.
It should also be remembered there’s no impetus for the government to actually shrink in size because of elections. Politicians want to stay in power, as they are “inferior men,” to quote H.L. Mencken, and they want to stay beholden to their allies inside and outside the halls of government. Would someone like Bernie Sanders or Elizabeth Warren or Chuck Schumer actually be in favor of a tax swap? My guess is no because they want government to hold onto as much cash as possible. FreedomWorks also rhetorically asked if Americans would end up being billed by the federal government for its carbon footprint.
The key factor in all of this is the fact the government has to cut expenses. Elected politicians refuse to – which is why taxes end up being raised at some point. Curbelo’s forthcoming proposal to repeal the gas tax is laudable, but his idea to replace it with a carbon tax should be rejected.