Opinion

Carbon Tax – How Can So Many Smart People Be So Wrong?

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Posted: Mar 03, 2019 12:01 AM
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Carbon Tax – How Can So Many Smart People Be So Wrong?

Source: (AP Photo/Ted S. Warren, File)

A common technique to convince us that an idea has validity is to impress with highly-credentialed individuals, with an air of bipartisanship, that obviously have ruminated on the proposal in a way we commoners cannot possibly even conceive.  Recently, a large group (the larger the group, the more we are supposed to swoon) threw their support behind a carbon tax.  Reading and analyzing what they purport brought me to think: how can all these people be so wrong?  And they are.   

A carbon tax is aimed at energy sources that are carbon based.  The Carbon Tax Center website (www.carbontax.org) will provide you information about a carbon tax.  Understand that the site is written and maintained by people in favor of establishing a carbon tax.  As stated by Dr. Matthais Kakuhl: “It is a tax that increases revenue without significantly altering the economy while simultaneously promoting objectives of climate change policy.”  As stated on the Carbon Tax Center website, “A carbon tax is the fairest, most effective, most efficient single policy tool in a fight for a habitable climate.”  The question is whether all that is true.

Apparently, some very smart people believe it to be true.   They wrote a column for the Wall Street Journal.  The authors included such luminaries as Paul Volcker, three other former Fed chairs, two former Treasury secretaries, 12 former chairs of the president’s Council of Economic Advisers, and 27 Nobel laureates in Economics.  That is a lot of brain power to contradict.  

The authors proposed five points in their column.   They state the carbon tax “is the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary.”  They say “a carbon tax should increase every year until emissions reductions goals are met and be revenue neutral.”   They go on to state that the tax will “replace the need for various carbon regulations that are less efficient.” This would create an incentive for other nations “to adopt similar carbon pricing.”  Finally, they say “To maximize the fairness and political viability of a rising carbon tax, all the revenue should be returned directly to U.S. citizens through equal lump-sum rebates.”

If only some of these concepts were not just theories and were not highly impractical in the real world.  When the applications fail and we are left holding the bag, then they would just say “Sorry; we meant to do well.”

Let’s start in the middle – the concept that is the best rationale for the tax – replacing inane regulations that would be harmful and counterproductive.  This is an excellent idea if somehow, we could be assured it would happen.  Once the tax is put in place, there is zero incentive for the legislators not to legislate.  If they put in a clause that said any additional legislation regarding the matter would trigger an immediate dissolution of the tax system, we could be assured this would work.  That would never happen; and, if the clause was inserted, how would that stop legislators from just naming their changes as something else and saying the legislation was not what it truly is?  Yellow is blue and blue is white.  They do this all the time: for example, “This is just a fee, it is not a tax increase.” Additionally, the bureaucracy could put in regulations that would fly under the radar.  Or we could have a president who says, “I am doing this.  If you don’t like it, sue me.”  That never happened, right?

The first two points are tied together.  They said it is the most effective way.  That assumes the free market will restrict the usage with higher prices, thus quelling demand.  At least they are honest.  Their intention is to scale up the tax until it hurts so bad, we will all abandon our cars and walk to work or get bicycles or maybe those new cool scooters.

This assumes that because of the new tax, we will abandon even further our use of gas-driven cars and all be driving Teslas.  That would be fine if the car companies could efficiently produce those vehicles and make them affordable to the masses.  They just are not now.  They are mostly toys to assuage the individuals wealthy enough to afford them.  

Not to mention, we will have all those solar panels and windmills producing enough energy since the Left has basically banned nuclear energy.   If only that could meet the needs of Americans.  Those forms of energy are nowhere close and will not be in the foreseeable future.

The fourth point is the most idealistic.  This would create an incentive for other countries.   I agree it is not an excuse that since China is a disgusting country fouling up the planet with waste and smog that we should not strive to do better.  We have done better recently excluding 2018, apparently while even the countries remaining as signatories to the Paris Accord have not.  We all know the secret to the other countries following us in the Paris Accord was a piggybank mostly funded by you know who – Americans.  To get countries to follow our lead, we will have to pay them off and pay them off and pay them off.  

The last point of equal repayment of the funds in rebates is so the initiative is revenue neutral.  First, this would be a massive redistribution of wealth.  As stated on the Carbon Tax Center website, more successful people use more energy; thus, they would only be getting back the amount that a lesser user of energy receives; not equal to their own usage.   Second, how long do you think it would be before the rebates would become income qualified?  As someone who knows the tax system well and knows almost all finances today are run through the tax system – almost all credits and government programs including Medicare are income qualified.

It is no wonder that the executive director of the Carbon Tax Center told me he thought that seeking bipartisan support for this proposal was a “fool’s errand” despite support from some elder statesmen of the Republican Party.   

In my opinion, based on our past experience with proposals like this, we would just be fools.