December 24, 2015

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

The Narrow Path to a Carbon Tax (GREG IP, Dec. 23, 2015, WSJ)

There's no dispute among economists on the most cost-effective way to do that: a carbon tax. President Barack Obama agrees. In Paris he called such a tax "the most elegant way" to incentivize investment in, and consumer demand for, cleaner energy technology. [...]

[M]r. Clinton wanted to use the BTU tax to reduce the deficit while Mr. Obama originally earmarked the money from selling trading permits for worker tax credits and green-energy subsidies. To win over conservatives, a carbon tax would probably have to be "revenue neutral," that is, used to reduce other taxes, as with the Canadian province of British Columbia's carbon tax.

George Frampton, an environmental adviser to Mr. Clinton, and Walter Minnick, a former Democratic congressman, are drumming up support for a carbon tax, half of whose revenue would be used to offset the effect on lower- and middle-income taxpayers and the other half to cut corporate tax rates, a longstanding priority of both Republicans and business. Mr. Frampton says the most promising way to create bipartisan support for the tax is to tie it to tax reform. By boosting investment, lower corporate tax rates could make the package, on net, neutral or even positive for growth.

Their proposal would collect the tax using existing federal infrastructure to collect fees, taxes and data on coal, refined oil and natural gas. A tariff on carbon-intensive imports would neutralize concerns about competitiveness.

Posted by at December 24, 2015 5:49 PM

  

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