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A Tax by Any Other Name

Posted By Nicolas Loris On March 2, 2009 @ 2:57 pm In Energy | Comments Disabled

Is still a tax. This notion is especially important now as more people are beginning to recognize what a cap-and-trade program to reduce carbon dioxide actually is: a heavy tax on energy consumption. The Wall Street Journal bluntly says [1], “If it brings in revenue that the government then spends, it’s a tax, and politicians should start referring to it as such.” And the revenue will be quite large; if enacted a cap-and-trade program will generate enough revenue to become the sixth largest source of federal receipts by 2019 [1].

In his speech last week he claimed, “If your family earns less than $250,000 a year, you will not see your taxes increased a single dime. Not one single dime.”

But Obama forgot to throw in the caveat, “unless you use energy.” Before Obama was elected, when discussing the intentions of his cap-and-trade policy (see the 32-second mark of this video [2]), he acknowledges that “electricity rates will necessarily skyrocket.” That’s a tax on your electricity bill, plain and simple.

As claimed by the Obama Administration in the federal budget blueprint, however, everything will be all right because the money will be recycled back to the people. Under the EPA’s section of the budget [3], of the total $650 billion in revenues from 2012-19, $80 billion each year will be used as a tax cut. From the New York Times [4]:

“That tax credit annually will provide $400 to low-wage and middle-income workers or $800 to couples; Mr. Obama would like to increase those figures to $500 and $1,000. The credit phases out for those with incomes above $75,000 a year and for couples with incomes of more than $150,000; no benefit would go to individuals with more than $100,000 income and couples with $200,000.”

And back to the WSJ [1]:

“By the way, the Congressional Budget Office estimates that cap-and-trade taxes would actually throw off as much as $300 billion every year — not merely $78.7 billion — and in a footnote the Obama budget implicitly acknowledges that its $645.7 billion estimate is a lowball: ‘All additional net proceeds will be used to further compensate the public. No doubt.”

So on surface it looks as if there will be winners and losers. But that’s expecting the tax cuts will offset the higher electricity costs. In reality, there will be losers and even bigger losers. Take, for instance, the results of a new study released by the George C. Marshall Institute. Bryan Buckley and Sergey Mityakov of Clemson University find [5]:

“The authors find that the constraints posed by the Lieberman-Warner cap-and-trade approach is equivalent to a constant (in percentage terms) consumption decrease of about 1% each year, continuing to 2050. Put another way, the cap-and-trade approach is the equivalent of a permanent tax increase for the average American household, which was estimated to be $1,100 in 2008, would rise to $1,437 by 2015, to $1,979 in 2030, and $2,979 in 2050.”

Furthermore, the Lieberman-Warner bill that died on the Senate floor last summer ratcheted down from a freeze at 2005 emissions levels in 2012 to a 70 percent reduction below those levels by 2050 [6]. Obviously a more stringent bill would result in a higher energy tax.

Americans won’t stand for an energy tax in such tough economic conditions. To make matters worse, this high tax will be for naught as cutting carbon solely in the U.S. will only change global temperatures by a fraction of a degree.

Implicitly acknowledging the futility of our CO2 cuts, the EPA outlines a case of international cooperation. Unfortunately this case requires the developing world, including India and China, to revert to their 2000 levels of CO2 emissions by 2050. On a per capita basis, China would backtrack to about one-tenth of what the US emitted in 2000. India and most of the developing world would have to drop to even lower levels. In short, this scenario is a fantasy.

What’s in a name? A lot of tax revenue for the federal government and more economic pain for the American consumer.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/03/02/a-tax-by-any-other-name/

URLs in this post:

[1] says: http://online.wsj.com/article/SB123569802712289113.html

[2] this video: http://www.youtube.com/watch?v=ydqg7ThZB04&feature=related

[3] EPA’s section of the budget: http://www.whitehouse.gov/omb/assets/fy2010_new_era/Environmental_Protection_Agency1.pdf

[4] New York Times: http://www.nytimes.com/2009/02/26/us/politics/26budget.html?_r=2&ref=politics

[5] find: http://www.marshall.org/article.php?id=636

[6] freeze at 2005 emissions levels in 2012 to a 70 percent reduction below those levels by 2050: http://www.heritage.org/research/EnergyandEnvironment/cda08-02.cfm

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