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Capping the Poor’s Ability to Prosper (Part 9 in a 10-Part Series)

Posted By Nicolas Loris On May 18, 2009 @ 4:06 pm In Energy | Comments Disabled

The difference between the price of a gallon of milk at a local grocery store and a corner market or convenient store may be modest, but add it up over the course of a few years, as well as paying higher prices for the rest of your groceries, and the difference is quite sizeable. That’s the theme of DeNeen Brown’s article in today’s Washington Post, asserting that the poor do not have supermarkets to walk to and thus pay a premium for most goods they buy [1]:

Prices in urban corner stores are almost always higher, economists say. And sometimes, prices in supermarkets in poorer neighborhoods are higher. Many of these stores charge more because the cost of doing business in some neighborhoods is higher. ‘First, they are probably paying more on goods because they don’t get the low wholesale price that bigger stores get,’ says Bradley R. Schiller, a professor emeritus at American University”

Jeanette Reed, a retiree living on a fixed income who sold her blood for money, discussed how the housing market hurts the poor too [1]: “You pay rent that might be more than a mortgage. But you don’t have the credit or the down payment to buy a house. Apartments are not going down. They are going up. They say houses are better, cheaper. But how are you going to get in a house if you don’t have any money for a down payment?”

Add in a massive, unprecedented tax on energy and it only gets worse.

The Heritage Foundation analysis [2]of the Waxman-Markey climate change bill, which focuses primarily on a cap and trade bill to reduce carbon dioxide, estimates a $1500 per year direct tax on household energy use. But that’s just the beginning. The energy tax also hits producers. As the higher production costs ripple through the economy the household pocketbooks get hit again and again. When all the tax impacts have been added up, the average per-family-of-four costs rise by $4,300 per year [3]. In the year 2035 alone the cost is $8,276. And the costs per family for the whole energy tax aggregated from 2012 to 2035 is $116,680.

You think the $116,680 lost from higher energy prices, all for a temperature change too small to recognize, could have helped with a down payment for Jeanette Reed?

The real tragedy is that these energy taxes fall disproportionately on the poor. Although upper income families tend to use more energy (and thus emit more carbon per household), since low-income households spend a larger percentage of their income on energy, the poor suffer most. Proponents of a carbon cap acknowledge this, saying [4], “Relative to total expenditure, however, the poor pay more […]. This means that carbon emission-reduction policies have a regressive impact on income distribution – unless coupled with revenue-recycling policies that protect the real incomes of the poor and middle classes.” Policymakers sought to protect consumers, especially the poor, from higher energy prices by handing out rebate checks or tax cuts. But [5],

House Democrats said Friday they plan to auction only 15 percent of the allowances to help lower- and middle-income families pay for higher energy bills. The rest will be given away to a variety of industries and states to ease costs and to help pay for improvements in energy efficiency and investments in clean-energy technology.”

If only a small portion of the energy tax revenue is given back to the consumer, the burden on the poor obviously becomes heavier. Rebates or not, the higher energy prices would reduce economic activity by forcing businesses to cut costs elsewhere, possibly by reducing their workforce, and thus doing damage that no check would cover.

Policymakers and business leaders spent weeks behind closed doors negotiating the details of the Waxman-Markey global warming bill, chiefly discussing the distribution of the allowance revenue–the equivalent of tax revenue. Most of it will be given to businesses. Who was representing the consumer?  Who was representing the low income families?

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

URL to article: http://blog.heritage.org/2009/05/18/capping-the-poor%e2%80%99s-ability-to-prosper-part-9-in-a-10-part-series/

URLs in this post:

[1] they buy: http://www.washingtonpost.com/wp-dyn/content/article/2009/05/17/AR2009051702053_3.html

[2] analysis : http://www.heritage.org/Research/EnergyandEnvironment/wm2450.cfm

[3] $4,300 per year: http://www.foundry.org/2009/05/15/the-4300-energy-tax/

[4] saying: http://www.capanddividend.org/files/WP150.pdf

[5] But: http://www.washingtonpost.com/wp-dyn/content/article/2009/05/15/AR2009051501798.html

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