September 4, 2015

TAX WHAT YOU DON'T WANT, NOT WHAT YOU DO:

The Key Role of Conservatives in Taxing Carbon (N. GREGORY MANKIW, 9/04/15, NY Times)

Policy wonks like me have long argued that the best way to curb carbon emissions is to put a price on carbon. The cap-and-trade system advocated by President Obama is one way to do that. A more direct and less bureaucratic way is to tax carbon. When polled, economists overwhelmingly support the idea.

One reason is that putting a price on carbon alters incentives in many ways. It encourages utilities to switch to cleaner forms of generating electricity, like wind and solar instead of coal. It encourages people to buy more fuel-efficient cars, form car pools with their neighbors, use more public transportation, live closer to work, and turn down their thermostats. A regulatory system that tried to achieve all this would be heavy-handed and less effective.

Motivated by this thinking, Washington Carbon, an advocacy group in the state, is now trying to put a carbon tax on the 2016 ballot. Initiative Measure 732 would institute a tax on fossil fuels of $25 a metric ton of carbon dioxide (which translates to about 25 cents a gallon of gasoline).

Most of the revenue from the measure would be used to reduce the state sales tax by one percentage point. A smaller amount would be used to reduce taxes on manufacturing companies and to fund a tax rebate of up to $1,500 for low-income working families. The overall plan is progressive and revenue-neutral. If passed, the initiative would yield a tax shift, not a tax increase.

That is why some environmentalists are opposed. 

Posted by at September 4, 2015 5:43 PM
  

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