The idea of a carbon tax has crept back onto the policy landscape in the past few weeks after years in the wilderness, and while specifics are still scarce, groups from across the political spectrum say it could take shape as part of a tax reform package expected in the next session of Congress.
Some conservatives, including economist Kevin Hassett of the American Enterprise Institute, have put forward the idea of a carbon tax swap, which would reduce taxes on labor or capital to offset the revenue raised via the tax. Such a trade could be made as part of a larger overhaul of the federal tax code, they suggest.
That is an idea that former Rep. Bob Inglis (R-S.C.) championed in the House, and last week he launched an initiative that has him taking the idea on the road to talk to Republicans and conservatives across the country (Greenwire, July 10).
President Reagan's Secretary of State George Shultz has also indicated he will back a carbon tax (ClimateWire, July 12).
"The necessity of new revenue as part of a tax reform package that lowers corporate and individual rates and cuts the debt is the underlying and broader driver in renewed conservative attention on these issues," said Paul Bledsoe, a former Senate Finance Committee aide who is now senior adviser at the Bipartisan Policy Center.
But others who are eyeing a carbon tax are less enthusiastic about conservatives' plans for the money that would be raised.
Autumn Hanna of Taxpayers for Common Sense said her group has supported a carbon tax for two decades but as a means of reducing the deficit.
"As far as revenue neutrality, that's not something that we think makes sense," she said.
The purpose of the new tax would be to raise revenue not to finance reductions elsewhere in the tax code, she said. "So if we do a direct tax swap by itself, that's not something that we think long term makes fiscal sense."
Taxpayers for Common Sense would entertain the idea of a larger tax overhaul effort that included a carbon tax and other changes, however.
Hanna said that reducing carbon dioxide would also help shield taxpayers from climate-related costs down the road, like weather-related damage to infrastructure. "We have to make sure we're looking at everything," she said.
Tyson Slocum, director of the energy program for Public Citizen, said his organization would not back a deal on carbon tax that was not "consumer-centric."
The carbon price will increase costs to consumers, he said, so Public Citizen will only accept offsets that go to benefit consumers, such as a dividend or payroll tax cut. The group will not accept a carbon tax as a way to lower corporate taxes, he said.
And Slocum said environmentalists and their political allies needn't offer that kind of deal. Fossil fuels companies and Republicans are already looking for ways to rid themselves of U.S. EPA carbon regulations, he said, and that will require legislation that can pass both chambers of Congress.
"There are not going to be the votes to revoke that authority," he said. "And the Supreme Court and lower court decisions have all made their rulings loud and clear that the EPA has this authority."
A federal appeals court ruled last month (Greenwire, June 26) that EPA was "unambiguously correct" in its current plans to regulate greenhouse gas regulations, making any future challenge to the agency's climate rules very difficult.
The only way for Republicans to win enactment of a bill that would pre-empt EPA is to return to the negotiating table with Democrats, Slocum said -- and Republicans know that.
"I think some of the prominent Republicans that are no longer actively holding office are saying these things, they're simply reflecting what's being said in private," he said. He added that current lawmakers are too hamstrung by the right wing of their party to show a willingness to bargain but such a strategy might reveal itself after the election.
Last week, BP Alternative Energy CEO Katrina Landis said a revenue-neutral carbon tax would be fine if it treated all forms of energy equally.
"What I think we wouldn't want to see is different forms of energy receiving different penalties associated with their greenhouse gas impact if it isn't measured greenhouse gas impact," she said.
Slocum said Democrats should not weaken their position by offering corporate tax cuts as a sweetener before negotiations even begin.
Economist Robert Shapiro, chairman and co-founder of the private finance consultant firm Sonecon, said EPA regulations could indeed strengthen environmentalists' hand.
"If the president is re-elected, the prospect of direct regulation will become a powerful incentive to find other ways to address greenhouse gases," he said.
The eventual bargain might have to include EPA pre-emption coupled with a significant, escalating carbon tax, he said.
But Shapiro said the process could still be done in the context of a tax overhaul that gave Republicans some other things they have sought, including lower corporate tax rates, and that benefitted consumers.
"There would be horse trading," he predicted.
- Jean Chemnick
eenews.net/public/EEDaily/2012/07/16/1
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