Such a tax is promised as the one-two punch that will put a significant dent in America’s fiscal crisis and the supposed impending doom from manmade global warming. This “market-based” approach will, supporters promise, bring new revenue to pay down the debt while reducing carbon dioxide emissions in a way that is less economically damaging than a cap-and-trade program.
But look past all the promises of revenue neutrality, and what do you find? A mess of bad assumptions and special interests.
Assumption #1: A carbon tax would reduce global warming. Regardless of what the truth is about manmade global warming or how fast the climate is warming or changing, a carbon tax would have a negligible effect on the global climate. Environmentalists are eager to point fingers at China when the solar industry fails to succeed even with federal subsidies, but they don’t seem to notice that any American carbon controls would have a miniscule impact on world temperatures—even if you believe the Intergovernmental Panel on Climate Change’s estimates.
Though Europe is bending over backwards to reduce its emissions—and paying for it economically—almost all of the projected increase in world carbon emissions comes from the developing world and is unaffected by carbon controls in the U.S. and Europe.
Assumption #2: Implementing a carbon tax would buck historical precedent and remain revenue neutral. It is clear that some special interests stand to benefit from a carbon tax, no matter how well intentioned. Many are already staking out a share of the new revenue for special interests—before the carbon tax has even reached the Senate and House floors.
Several politicians and think tanks have signaled their acceptance of a carbon tax in exchange for a reduction in corporate income taxes (which will never creep back up, right?) or in place of more burdensome environmental regulations (which the left will happily drop after so many years of work, right?). Sadly, even some conservatives are falling for this bait-and-switch.
Bad assumptions lead to bad policy that either addresses symptoms rather than causes or does not address the problem at all and in fact creates a new one. Even if the tax somehow remained revenue neutral, a carbon tax ignores the federal spending (not revenue) problem and would certainly increase energy prices and sock the economy.
America’s economy—from electricity and fuel to food, products, and services—depends on conventional energy, and when prices go up, the effects ripple throughout the entire economy. A carbon tax would add an unnecessary cost that would be passed on to consumers, no matter how creative Congress can be in mitigating the effects with compensation caveats. Americans don’t want to pay more for energy—regardless of which scientists they believe about global warming.
Fossil fuels may make a convenient punching bag for politicians. But government-induced higher energy prices are bound to come swinging back and hammer the economy—along with everyday Americans.