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The Conservative Case For A Carbon Tax
Our government is deeply in debt and we need money to pay it back
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Chairman of Infrastructure Management Group
Image: AP.
Harvard University's campus geography mirrors its lopsided political divide. The south bank of the Charles River is home to the Harvard Business School, the graduate alma mater of Mitt Romney and other job creators. To the north lies the rest of the campus, including the Graduate School of Arts and Sciences.
Its former dean, esteemed sociologist and noted apologist for all things Obama, Theda Skocpol, has just published a 145-page study that attempts to exonerate the president of environmentalists' charges that he could have, should have, achieved climate legislation incorporating what she refers to as "the holy grail of cap-and-trade." The bad guys duped the public yet again, she says, so we need a grass roots campaign, not a better president, to get the grail through Congress.
Cap-and-trade works by having the government set an overall national cap on greenhouse gas emissions and then selling only enough "credits," or rights to pollute, to keep total emissions under the cap. Companies that can reduce their emissions at a low per-ton cost then sell their credits to other companies with higher unit costs. The planet is thereby saved as cheaply as possible.
Professor Skocpol's enthusiasm for cap-and-trade is notable because it is based upon the ethical and economic principle of "polluter pays"; that is, by putting a price on carbon we force polluters themselves to find innovative solutions that are invariably more efficient than one-size-fits-all regulation. Fewer jobs are lost, and the economy grows faster.
Moreover, pricing pollution means that somebody has to collect the money, so it might as well be the government. Indeed, the president's early budget submittals looked to cap-and-trade as a big money-raiser to help pay for, among other things, its health care reforms.
The problem with cap-and-trade - notwithstanding its success in reducing the sulfur oxide emissions from coal-fired Midwestern power plants that caused acid rain in the Northeast - is that it doesn't work well when applied across multiple industries and thousands of diversified sources. It quickly becomes a chaotic and enforceable mess, as it has in Europe and soon in California. The silly spat over fumes from American transcontinental airliners is a case in point.
You see, when it comes to carbon and global warming, we are all polluters - we drive cars, we light our homes, and we use factory-made products. Therefore all of us - not just the rich - should pay for our own polluting, as measured by our personal carbon usage. Trying to hide the costs by taxing only oil companies and regulating (at significant expense) manufacturers actually increases the costs, and is less effective. We do not allow even our poorest citizens to throw litter onto our highways or dump motor oil into our sewers, and an increasing number of cities charge for garbage disposal by the bag, so let's not get bogged down in progressive-versus-regressive tax arguments.
Environmentalists and many liberals love the idea of a carbon tax. It is the very best kind of consumption levy, they say, because it penalizes polluters, rewards green behavior (coercive as that might feel), and raises revenue for important public purposes, such as... Well, that's the best part: if we're going to tax, "Why tax good things when you can tax bad things, like emissions?" asks a recent New York Times op-ed.
Our government is deeply in debt and we need money to pay it back, lots of it. We've already jacked the top tax rates back to levels higher (factoring in Obamacare taxes) than when Bill Clinton was president. Moreover, nearly every economist, Democratic and Republican, acknowledges that low, broad-based tax rates of the type recommended by the president's Bowles-Simpson commission - along with consumption taxes that incentivize prudence and saving - are better for economic growth over the long term than a loophole-ridden high rate system. And without that GDP growth and its consequent elevation of federal revenues, our entitlements and our grandchildren's quality of life are all toast no matter how much we tax the rich.
So here's the deal for conservatives and liberals, including Professor Skocpol and nearly every American environmental group: let's impose a broad-based carbon tax, one that starts small and slowly increases as the economy recovers to a level that drives innovation, moves individuals and companies to voluntarily buy greener technologies, and coincidentally yields new tax revenue to stabilize the national debt, sustain entitlements and hold down marginal tax rates.
The government of British Columbia used the proceeds from its modest carbon tax to lower its corporate tax rate from 12 percent to 10 percent, contributing to the province's economic boom. A carbon tax of just $30 per ton would yield $150 billion a year to the U.S. Treasury, enough to reduce corporate and personal income rates by 10 percent and still leave a nice chunk left to help pay for universal health insurance.
You don't have to believe in manmade global warming to like that.
Steve Steckler is chairman of Infrastructure Management Group, Inc. He has managed many of the largest public-private partnership transactions in the U.S., and is a frequent author, speaker and advisor to U.S. and international governments on fiscal management and regulatory policy.
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