Carbon Tax

We are in favor of a limited carbon tax.  Our preference is that we eliminate all tariffs, the gas tax, and a few other things and replace it with a carbon tax.  There is no need to develop a complicated rebate program because all of the taxes involved are regressive so there is no change in the tax structure.

The WSJ has had a proposal for a more extensive carbon tax.  They are kinda against it and explain why:

A carbon tax would be better than bankrupting industries by regulation and more efficient than a “cap-and-trade” emissions credit scheme. Such a tax might be worth considering if traded for radically lower taxes on capital or income, or is narrowly targeted like a gasoline tax. But in the real world the Shultz-Baker tax is likely to be one more levy on the private economy. Even if a grand tax swap were politically possible, a future Congress might jack up rates or find ways to reinstate regulations.

We support a small carbon tax.  We do not support a large carbon tax with a “dividend” to some folks.  It is inadvisable to make carbon exhorbitantly expensive as it will supply energy for the foreseeable future.  It is advisable to tax all forms of carbon equally rather than just gasoline.  It is advisable to trade a small carbon tax for a reduction in regulations.

We have some, but not much, sympathy for the WSJ’s concerns about actions in the future by Congress.  The Democrats have wanted to increase taxes for the last 50 years.  The Republicans wax and wane.  The fight against higher taxes and onerous regulations will go on forever regardless of what taxes exist.  The Democrats want to increase payroll taxes, increase marginal rates, and create new taxes.  They seem likely to continue with these proposals.

Conservatives need to be bold to find solutions.  We need to consider a carbon tax and a VAT in reaching our economic goals including lower taxes,  less complicated taxes, and fewer regulations.  There is a risk in creating a new tax but there are opportunities including eliminating the gas tax and reducing energy regulations.  It is time to be bold but not foolish.  A step towards a more rational energy policy would be replacing the gas tax with a revenue neutral carbon tax.  Regulation reform might be connected to the switch.  It is one of many possible deals.  Let’s consider them.

 

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