A Good Start

We have been hard on the WSJ lately.  Holman Jenkins, jr, one of our favorites, did nothing to help their batting average.  We’ll see if we can get to that later.  Edward Kleinbard has an excellent idea about tax reform that is consistent with our thinking.  You can look it up as we don’t reference ourselves.  Edward reports that a carbon tax of $25 per metric ton would raise $1 trillion over ten years.  He starts with some assertions that are not unreasonable:

To reset the competitiveness of the U.S. tax system, corporate tax reform must be permanent and revenue-neutral. The $1.5 trillion in incremental deficits just approved by the Senate would actually cut into growth, because interest costs on new debt crowd out private investment.

We would add that the reform of corporate taxes (business taxes would be even better) must be large.  He then outlines the positions of the two parties and where the room is for negotiations:

Earlier this year Democratic Sens. Sheldon Whitehouse and Brian Schatz proposed a trade along these lines, but their plan is politically infeasible. They want a carbon tax rate that starts at $49 a ton and ratchets up annually, and their suggested 29% corporate tax rate is unresponsive to the needs of Republicans and many business leaders. This doesn’t mean a deal can’t be reached. The parties need to embrace face-to-face negotiations—not Republican leaders holed up in the White House trying to get corporate tax reform done without a single Democratic vote.

We would also insist on eliminating the gas and diesel tax so that gas is not subject to a double carbon tax. We think $49 per metric ton is high and $25 would be fine but that is the business of politics to negotiate.  A carbon tax of $49 might be sufficient to eliminate the gas tax and corporate tax.  Alternatively, the $49 carbon tax might allow elimination of the gas tax, reducing the corporate rate to 15 percent, and refunding part of social security for low income folks.  Reducing social security would keep the carbon tax from falling too heavily on low-income folks.

We are with Edward.  It is time to negotiate.  Accepting a carbon tax for reduced business taxes seems like a reasonable deal.  You elected officials should be better at negotiation than you have shown so far.

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