The White House continues to inch closer to a carbon tax. In Obama’s first post-election press conference, he dodged the question. The next day his spokesman Jay Carney said: “We would never propose a carbon tax, and have no intention of proposing one.” Great, but they don’t have to propose it. The proposals have now been made by Obama’s key allies. Senator Barbara Boxer, the chairman of the Senate Environment and Public Works Committee introduced a carbon tax bill with Vermont’s Bernie Sanders, a self-described socialist. On the House side, the top Democrat on the Energy and Commerce Committee, Henry Waxman, has introduced a carbon tax discussion draft. This week Obama indicated he’s quietly preparing to back these proposals.
“If we move aggressively on an issue like climate change -- that’s not an easy issue for a lot of folks,” Obama said to the first meeting of the operatives of Organizing for Action – his supposedly non-partisan continuation of his presidential campaign. “I want to make sure that a congressman, senator feels as if they've got the information and the grassroots network that’s going to support them in that effort.”
So the bills have been introduced and Obama is readying his grassroots army. This is looking increasingly real, and the economic stakes are enormous.
Let’s start with the pain at the pump. The Boxer-Sanders bill taxes carbon dioxide at $20 per metric ton, which works out to 17.8 cents a gallon of gasoline. So it basically would double the existing federal gas tax. (Which of course begs the question – don’t we already tax carbon enough?) It gets much worse; Boxer-Sanders automatically raises the tax 5.6 percent per year for 10 years, enough to double the tax to 30 cents. And the tax would also hit your electric bill, of course, and industrial energy users would be hit hard.
A study by the National Association of Manufacturers found that a carbon tax similar to Boxer-Sanders would knock an immediate half a percent off of GDP and threaten millions of jobs.
The Waxman discussion draft is potentially much worse. It proposes a range of starting prices and automatic increases up to $35 per metric ton and 8 percent. That would mean about 31 cents a gallon gas tax to start, automatically jumping to 67 cents by year 10 and $1.34 by year 20. Of course electricity generation, manufacturers, and every product grown, shipped, or manufactured would also be hit.
But perhaps the biggest danger is that despite the widespread economic damage, these proposals could become politically viable by incorporating large scale income redistribution. Even one supposedly conservative advocate of carbon taxes recently suggested 11 percent of the revenue should be used to increase social welfare spending to alleviate the impact of higher energy prices on the poor. We can safely assume the liberals will push for a much larger piece than that, perhaps issuing free gas cards much like existing food stamp cards so hardworking taxpayers can pick up the (fast-rising!) gas tab not just for themselves but for others, too.
Fortunately, some leaders in Congress are not waiting for the Democrats to spring this trap. Congressmen Steve Scalise of Louisiana and Joe Barton of Texas have introduced a resolution of disapproval making clear that a carbon tax would be economically destructive and should be rejected. Such “Sense of Congress” resolutions are usually just political statements, but given the marshaling of Democratic forces, it could serve as a vital prevention strategy to put the House firmly on the record in opposition now and prevent any risk of a carbon tax emerging as a real possibility. House leadership would be wise to bring the resolution to the floor and put the House on record against this terrible idea.