Does This Look Familiar?

Regular readers know that I am a proponent of a carbon tax with income tax offsets. See my essay The Case for Higher Gas Taxes for details.

A bill proposing that has now been proposed:

Revenue-Neutral Carbon Tax: The Raise Wages, Cut Carbon Act of 2009

I’m Bob Inglis from South Carolina’s Fourth District. Thank you for being part of this virtual hearing on our bill—The Raise Wages, Cut Carbon Act of 2009. I’m here to talk about—and give you the opportunity to talk about—how to make this bill even better.

Let me start by describing where I think we are. Polling data shows for the first time in a number of years that people are actually valuing the environment below economic recovery. The challenge before us is to come up with something that works for both: accomplishes good economic progress and recovery, but also addresses the problem of climate change.

What if we start with a reduction in taxes? We chose the payroll tax. You pay 6.2% on the first $106,800 worth of income; your employer pays 6.2%. What if we reduced that tax, and then in its place imposed a tax for the first time on carbon dioxide? There would be no additional take to the government. There would be a tax reduction followed by a new tax, in equal amounts, so that it is truly revenue neutral.

Greg Mankiw also has something up on the issue:


A Letter to the Pigou Club

From Congressman Bob Inglis:

Dear Pigou Club Members,

A revenue-neutral carbon tax could set up a bi-partisan triple play of this American century. We can clean up the air, create jobs, and enhance our national security.

My Raise Wages, Cut Carbon Act of 2009 cuts payroll taxes and, in equal amount, imposes a tax on carbon dioxide emissions. The tax is border adjustable and is designed to be WTO compliant.

We’re conducting a “Virtual Hearing” on the Raise Wages, Cut Carbon Act of 2009 in the hopes of improving the bill before I actually file it. I’ve kicked off the “hearing” with an opening statement, which you can find here, along with a copy of the bill, a summary, and various white papers addressing different portions of the bill. I’d love for you to look over these materials, and then tell me what you think by posting a YouTube response to my opening statement. You can do that here.

Thank you, and I look forward to benefitting from your expertise and insights!

Sincerely,

Bob Inglis
Member of Congress (R-SC4)

Where do I sign up?

Hat tip to a reader for flagging this to my attention.

39 thoughts on “Does This Look Familiar?”

  1. If you have to do it, a tax and rebate plan is the least objectionable way to limit CO2. We could quibble about whether rebating FICA is the way to go.

    I would instead give a rebate on income taxes payable to any legal resident with a SSN. That gets dependents and retirees.

    So far we haven’t talked about Waxman-Markey. WM includes both a cap and trade and a renewable portfolio standard. This reminds us of the ethanol mandate and subsidy. If ethanol is mandated then why does it also have to be subsidized by the blend credit?

  2. Well, this might be what needs to happen to make something like this pass.

    But considering the bottom 50% of Americans don’t pay income taxes, I don’t really see much purpose of it, other than getting the political buy-in from Republicans.

  3. Looks like Inglis is talking about a Payroll tax cut.And I would definitely do it via tax credits. I think that’s the only chance you have to get a majority on board.

    RR

  4. Brings us straight back to the question of whether reducing life-supporting atmospheric CO2 is a smart thing to do with our finite resources. Added to the question of — even if it is the right thing to do — does it make any difference to the planetary atmosphere what happens in the US unless the approx 4 Billion people outside the OECD also agree to do something similar?

    The foundation of any policy has to be first finding a reasonable way to decide whether reducing anthropogenic CO2 is a good thing to do.

  5. I think this is a good idea. Tax gasoline consumption, and take the money and put it into the SS fund, and cut SS taxes.
    I read Obama’s book (The Audacity…) recently, and it is disappointing regarding energy. He does not even mention higher gasoline taxes.
    Really, few are. I guess it is one of those “third rail” issues.
    The possibility of higher gasoline taxes in the USA should be a yellow flag, however, for oil bulls. A few meaningful policy changes in China or the USA, and the outlook for oil demand could be positively gloomy.

  6. Inasmuch as CO2 is steadily rising in the atmosphere, and temps have been going down shouldn’t we wait a couple of years until we get a little better handle on this?

  7. in order to reduce CO2e, energy consumption must be reduced. how does the consumer feel pain of use under this method of income re-distribution? what is the motivating mechanism effecting consumption reduction?

    as all payroll tax finds its way into the general budget fund under “unified budget “, with worthless IOUs placed into SSA “trust fund”, how does this action help in any way, but to lead to more tax or more need to borrow to provide needed annual funding? 100% of payroll tax is spent each year, there are no true funds set aside anywhere. we have deficits each year; this action would increase deficit spending.

    what am i missing?

    fran

  8. Added to the question of — even if it is the right thing to do — does it make any difference to the planetary atmosphere what happens in the US unless the approx 4 Billion people outside the OECD also agree to do something similar?.
    Somebody has to lead, and usually that is the US of A. Seeing as Americans produce the most CO2 per capita, it actually makes sense to start here. The 4 billion will catch up (in every sense of the word) soon enough.

    A few meaningful policy changes in China or the USA, and the outlook for oil demand could be positively gloomy.
    You mean the kind we have not seen for the last 100 years? I wouldn’t bank on meaningful change this time either.

    And oil seems wedded to $50/bbl.

  9. Fran,

    The cost of using technologies rises relative to the amount of CO2 they are responsible for. So, for example, while the operating cost of an electric car may not go down, the price of operating a petrol car would effectively go up. So, the consumer feels the pain relative to the fuel source.

    The idea of the proposal, thus far, is not to increase or change tax allocation at all, merely to change the source of the tax load so that behaviour can be modified.

  10. Fran,

    To continue, decreased payroll tax takes less away from companies, allowing them to reinvest, expand, or do what they like.

    With an income tax, the only way to reduce tax load is to reduce your income or cheat the system. With a carbon tax, there is a financial benefit to reducing emissions to a certain extent.

    Mike

  11. Optimist:
    Well, true, no meaningful gasoline taxes in the last 100 years in the USA. But sometimes things change. And China is a mercantile nation. They may simply mandate PHEVs for light duty vehicles, and promote CNG trucks running on gas from domestic CTL plants.
    My point is, most of us “expect’ tight oil supplies sometime in the future. But we may be wrong. The two largest consuming nations (China and USA) may start using less, not more, while Europe and Japan already use less every year.
    Add to this the possibility that some nations in the Iran, Iraq, Venezuela, Mexico, Libya, Russia, Nigeria, Angola nuthouse collection fix-up their fields and start producing a lot more.
    Palm oil output will soar in years ahead, from groves planted 2004-2008, and improving yields.
    $50 a barrel may look high by 2010.

  12. what am i missing?Let’s count them:

    1. in order to reduce CO2e, energy consumption must be reduced.
    Nope. Efficiency (and carbon efficiency if you wish) can increase leaving you with less CO2 per kWh consumed. Carbon-free sources of energy, such as nuclear and renewables, achieve the same thing.

    2. how does the consumer feel pain of use under this method of income re-distribution?His electrical rates goes up, depending on how much CO2 is involved. His gasoline and natural gas prices would increase likewise.

    3. what is the motivating mechanism effecting consumption reduction?As we learned in summer 2008, consumption is quite price-sensitive…

    4. as all payroll tax finds its way into the general budget fund under “unified budget “, with worthless IOUs placed into SSA “trust fund”, how does this action help in any way, but to lead to more tax or more need to borrow to provide needed annual funding?Before my head explode, let’s stick to the topic at hand. Which is NOT budget reform.

    5. 100% of payroll tax is spent each year, there are no true funds set aside anywhere. we have deficits each year; this action would increase deficit spending.
    How does this increase deficit spending ?!?

  13. And China is a mercantile nation. They may simply mandate PHEVs for light duty vehicles, and promote CNG trucks running on gas from domestic CTL plants.
    As a mercantile nation, China is hardly likely to mandate an unproven technology, especially at $40,000 per vehicle. And before CNG takes off, it needs to be cheaper than crude.

    $50 a barrel may look high by 2010.
    Here we face (again) the central inconsistency in your rose-tinted view of the future, Benny. For China to convert to CNG, you’ll need crude to go up, probably to $150/bbl and beyond.

    As a mercantile nation, the won’t be doing it just to make US oil imports cheap…

    Palm oil output will soar in years ahead, from groves planted 2004-2008, and improving yields.
    Great news for the hungry in Africa and elsewhere. Pretty much irrelevant as far as energy is concerned…

  14. Most people would actually get more money back than they would pay in taxes. Limousine environmental liberals (Barbra Streisand, George Clooney, etc.) would pay for their profligate lifestyles.

    Such a tax would hurt energy intensive export sectors like steel, agriculture, heavy equipment manufacture. But the US has steadily shifted from such industries to more knowledge jobs.

    But compared to cap and trade or some of the other looney proposals coming out of congress, tax/rebate does the least damage.

  15. Optimist-

    As a central-planning mercantile nation, China may move to CNG trucks to limit imports, and develop jobs for Chinese. The price signal may not determine policy. $150 a barrel equivalency sounds high anyway. We know they are committed to their CTL plants, and we know that CNG trucks are already used in Asia (I saw many in Thailand).

    China manufacturers will start production on PHEVs next year. And not at $40k. Remember, China has cheap labor, and lithium, and tons of lithium battery makers (literally thousands).

    The boom in Chinese demand for oil may never materialize as envisioned.

    I could say those who are sure of a boom in demand are using rose-tinted glasses as well. They are bulls ignoring possible pitfalls.

    But personal attacks and ad hominem arguments are tiring.

  16. Limousine environmental liberals (Barbra Streisand, George Clooney, etc.) would pay for their profligate lifestyles.
    Hey! Why did Al Gore not make that list? Last I checked you weren’t buying his it’s all taken care of excuse…

    The real issue when this stuff works as expected, suddenly the tax receipts go down (since we all learn to use so little carbon) and then they have to crank up the tax rate somewhere to make up for the shortfall…

  17. But personal attacks and ad hominem arguments are tiring.
    What personal attack? Ad hominem argument? I was specifically refering to your views, was I not?

    You don’t think it is tiring to read the same argument about why $10/bbl is just around the corner?

  18. Optomist – there are a LOT of harpies that qualify. Al Gore (private jets, big house, heating his pool in the winter), John Travolta (owns a 707), Sting (7 homes), RFK Jr (against Cape Wind, private jets).

    The only star who might make out well is Ed Begley, Jr.

  19. Begley with his residential wind turbines? The ones for peoples rooftops that have a 1000 year payback, if that?

    Where I live gas is 10 USD per gallon and there is still plenty of traffic – OK at US prices there would be far more traffic for sure.

    I am totally against selling or trading carbon as I have worked in the 3rd world end and seen how it works there – considered by some as free money as they can get government approvals for supposed reductions and still do the same thing they planned on anyway.

    For the palm oil – right it will make no difference. Thirty years back friend of the owner of the company I worked for sent us some oil bearing nuts from Brazil to explore as an oil/gas source to replace natural gas we required. It immediately became evident that zillions of those nuts were of no use considering a single iron ore plant uses something like 1.2 million SM3 of natural gas per day to produce 5000 mt of iron.

    Besides that the stupid things had termites in them.

  20. One thing I don’t get about this otherwise excellent blog : Robert says he has no opinion on AGW. Why support a carbon tax, then?

  21. Robert says he has no opinion on AGW. Why support a carbon tax, then?First, I didn’t say I have no opinion on AGW. What I said was that my understanding is not deep enough – and I don’t have time enough – to engage in debate over the subject. Too much of that debate just degenerates into a shouting match.

    But there are lots of reasons to have a carbon tax. First, fossil fuels aren’t sustainable, and I want to see us move toward sustainability before nature enforces that upon us. If nature does it, the results are going to be unpleasant. Second, lowering our consumption improves our energy security. Third, there are lots of pollution benefits that go along with reduced consumption. I am looking out over a hazy Dallas sky right now that is partially a result of all these cars.

    RR

  22. I am highly skeptical of catastrophic AGW theory, yet I could support a CO2 tax and rebate plan for some of the same reasons as Robert has stated. We tend to use energy inefficiently. A tax and rebate turns into a voluntary tax on energy. You can use you rebate money to increase energy efficiency.

    I also don’t believe that a modest tax on energy would destroy the economy. An additional $0.50 – $1.00 per gallon will modify driving habits. Texas created 70% of the new jobs in the nation in 2008, yet it has electricity prices higher than the national average ($0.10-$0.14/kWh).

    But if we enact such a tax we should scrap CAFE standards, ethanol subsidies and mandates, renewable portfolio standards, wind/solar subsidies, and other incentives and let the marketplace sort out winners and losers, not congress and the lobbyists.

  23. “let the marketplace sort out winners and losers, not congress and the lobbyists.”Amen, brother! The political class has become a wasteful overhead that we cannot afford.

    If we are going to put an additional tax on energy — it would inevitably be additional, since the Chinese are showing declining interest in continuing to lend Obama money to cover his increasing budget deficits — then let's be honest about it. Let's not pump out hogwash about CO2 to justify it. Instead, let's focus on the true objective, whatever that may be.

    It would be much better for fossil fuel use to decline because it cannot compete with a more economic alternative. The only policies that make sense are those which promote research & development of true alternatives that can compete unsubsidized nose-to-nose with fossils — and can carry an equivalent tax burden.

  24. “First, I didn’t say I have no opinion on AGW. What I said was that my understanding is not deep enough – and I don’t have time enough – to engage in debate over the subject.”What’s to debate? King of Katy’s excellent short comments on the limitations of modeling and on the prevalence of negative feedback loops in nature just about says it all.

    If there is not an equally pithy response to his points, then there really cannot be too much to the hypothesis of Anthropogenic Global Warming.

    “Too much of that debate just degenerates into a shouting match.”Unfortunately, that is true. Even more unfortunately, most of the time the shouting seems to come from the True Believers, who chant “consensus” insteady of rationally discussing science.

    If politicians want to make everyone poorer in the name of stopping Anthropogenic Global Warming, then the real scientific debate becomes unavoidable. Otherwise, the policy will change with each new election — leaving us with all pain, no gain.

  25. A pol I saw today said only 51% of Americans believe in climate change.

    Tell you what – if one person pees in the pool it isn’t an insurmountable problem – if you have several billion people doing it without remedial measures I have great difficulty believing things won’t go to hell in a hand cart.

    A carbon tax is the only way to get peoples attention and point out a better way to go.

  26. I also don’t believe that a modest tax on energy would destroy the economy. An additional $0.50 – $1.00 per gallon will modify driving habits. Texas created 70% of the new jobs in the nation in 2008, yet it has electricity prices higher than the national average ($0.10-$0.14/kWh).
    That IS interesting, King! Too bad King dimWit (no relation) was apparently unaware.

    King: let the marketplace sort out winners and losers, not congress and the lobbyists.
    Kinu: Amen, brother! The political class has become a wasteful overhead that we cannot afford.
    Couldn’t agree more.

    Now this is beginning to sound festive. Anybody for some tea?

    …since the Chinese are showing declining interest in continuing to lend Obama money to cover his increasing budget deficits
    Yeah! That &^%$^%$ Obama really screwed things up in the almost three months he's been in power! And that after Dubya worked so hard to reduce our deficits and to lend less from China…

    Talk about pesky True Believers

    If we are going to put an additional tax on energy — it would inevitably be additional
    Not so fast, Champ. We’re bailing out every industry you can think of. Before that the Starve the Beast party were comfortably raising the size of government including the non-defense parts that had nothing to do with defending the homeland.

    There is a tax increase coming, just don’t tell the peasants (at the tea party), yet. It has many causes, on both sides of the isle.

    To blame a carbon tax for the state of the US deficit is a bit blatant, don’t you think?

  27. There may be another way to look at this that avoids the whole global warming debate entirely.

    We could argue that God (or the Flying Spaghetti Monster or whatever deity you believe in) left humankind a large and growing store of fossil fuels. We humans in the last 200 years or so are consuming these stores of energy at a rate faster than nature is replacing them. In doing so, the price of fossil fuels is currently less than replacement value. By inefficiently using energy today, we are potentially robbing future generations of energy. Sooner or later this bill will come due. It is humankind’s best interest to forestall this reckoning as long as possible.

    Future humans may disover forms of energy (my bet is on fusion) that will make fossil fuel look as quaint as whale oil appears to us today – but we can’t necessarily count on that.

    By taxing fossil fuels, we move their price closer to replacement value. We extend the limited supplies of fossil fuel for as long as possible, giving future generations time to solve the problem. Tax and rebate makes our participation in energy conservation totally voluntary. We can choose to use our rebate to buy more fossil fuel, or we could use it to buy more energy efficiency.

    PV solar at around $0.20 – $0.30 /kWh is the current “replacement value” for coal and natural gas (I’d have to work out the storage issue.) Something like $4 per gallon for equivalent biofuel is the replacement value of crude oil. We don’t need to tax conventional fuels at 100% of the difference to be effective. We should probably start slow and then ramp up the taxes.

    Instead of “saving the planet” from some controversial future calamity, we’ve shifted the argument to fiscal conservatism – saving humankind from an energy deficit.

  28. There is a tax increase coming, just don’t tell the peasants (at the tea party), yet. It has many causes, on both sides of the isle.

    A few weeks ago I read an op ed by a former Clinton staffer who essentially said the same thing. There is no way to tax just the rich to pay for all the spending that Obama wants. Obama and his advisors know this, yet they are making a political calculation that they won’t have to pay the piper until after his reelection (when suddenly he realizes that he has to tax the other 95% of working Americans).

    This makes Obama really look like just another politician and not hope and change. And yes GWB and the republicans ran up deficits too, but they look like pikers compared to the current resident of 1600 Pennsylvania Ave.

  29. King-
    I like your comments on conserving resourcs through taxation, but jeez, give Obama a break. He inherited a train wreck. If he can just get the train back on the track, that will earn him points from me.

  30. RR wrote,

    “I am looking out over a hazy Dallas sky right now that is partially a result of all these cars.”

    My air is clean; raise the taxes where you live. Tell me how it turns out.

    King wrote,

    “Texas created 70% of the new jobs in the nation in 2008, yet it has electricity prices higher than the national average ($0.10-$0.14/kWh).”

    If you electricity is expensive it is because you use natural gas to make it. How many jobs crated in Texas were created as a result of high natural gas prices?

    High energy price generally means Kit has a high paying job. However, it is obvious how high energy prices hurt others. Many jobs leave the US. If making steel in China reduced ghg that would be different but places like China are pathetic.

    If you measure per capita ghg the US, we look bad. However, it you measure ghg per ton of steel or boat load of wheat, the good old US of A looks pretty good.

    The reason I do not like to debate AGW is because it is already official US energy policy since May of 2001. Debate how that policy is implemented is fair game. If it look like a tax, walks like a tax, and quakes like a tax; could it just be a tax?

    Where I live the rates for electricity are increasing. This is primarily because of the capital cost of pollution controls at about $300 million per coal unit. Ironically, this will increase ghg per MWh of generation.

  31. “By taxing fossil fuels, we move their price closer to replacement value.”
    In the run up to the next great expensive global CO2-fest in Copenhagen, the Saudis have been reported as saying that the topics must include the equitable distribution between nations of climate taxes on fossil fuel. Makes perfect sense — after all, the True Believers will, if successful, impoverish human beings in oil producing countries.

    Once the Political Class starts discussing sharing new tax revenue with oil exporters, it won’t take long for sharing of existing taxes on oil to be added to the discussion. All you guys with great ideas for carbon taxes should keep this in mind — the Law of Unintended Consequences has not been repealed.

    What we really need are true competitive large-scale non-fossil energy sources. Nuclear fission is what we have today, although it does not directly address the transportation fuel issue. If we are really serious about fossil fuel depletion, we have to get back to nuclear fission, while simultanteously sponsoring the decades-long research into other genuine competitive alternative energy sources.

    We have a supply-side energy challenge. Let’s address that, instead of fussing about with unscientific nonsense about CO2.

  32. Robert, if your intent is to fight pollution, then tax pollutants (NOx, SOx, particulates, etc.) As for shortage, that gets solved by rising prices (unpleasantly, of course, but wishing to eliminate unpleasantness altogether is what ends up generating atrocities).

  33. What problem?

    Nick wrote,

    “Robert, if your intent is to fight pollution, then tax pollutants (NOx, SOx, particulates, etc.)”

    These pollutants are already regulated. I have lived near some some coal plants. The one built down town in the 30 were a problem. Ones built in the 70s were much cleaner. If you pecked your angle right, you could see some haze. Those plants have since been retrofitted. There are two plants out west where I have never seen any haze from the plants. If you are in a big city like Seattle or Portland, you will see haze, if you are looking from the city.

    RR see haze because he lives in a city with a million or so of his closest friends. That is is his choice.

    Solving AGW and the other problems RR worries about is easy. I will do it without taxes. I we need to do is take away the choices that RR, Gore, and Clinton families. The Clintons and Gores will be in a 1 bdr apartment walking distance from the community center. No more black tie gala dinners in NYC to show how environmentally friendly they are.

    RR is not going to like the choice I will make for him. This is just an assumption on my part because there is no tax or regulation preventing him from making better choices.

    If the root cause of the a problem can be solved with engineering, I am ready. However, energy is already heavily taxed. Energy taxes are among the most regressive. Tax the poor and tell them you are taxing the rich. Avery good way to not reduce ghg.

  34. ‘We chose the payroll tax. You pay 6.2% on the first $106,800 worth of income; your employer pays 6.2%.’

    So this is the Social security and Medicare taxes, also known as FICA taxes

    So this would be a large tax increase on the retired and anyone that doesn’t have a normal income.

    Do you thing the AARP will favor a TAX that hits there people this hard?

    Just when back and checked, I havn’t paid FICA taxes in the last 12 years so this would be a big tax hit.

  35. The following provides another example of the law of unintended consequences and further shows why we can’t let congress pick energy winners and losers – the don’t know what they are doing.

    Pulp Nonfiction

    “Thanks to an obscure tax provision, the United States government stands to pay out as much as $8 billion this year to the ten largest paper companies. And get this: even though the money comes from a transportation bill whose manifest intent was to reduce dependence on fossil fuel, paper mills are adding diesel fuel to a process that requires none in order to qualify for the tax credit. In other words, we are paying the industry–handsomely–to use more fossil fuel.”

    “In fact, the money to be gained from exploiting the tax credit so dwarfs the money to be made in making paper–IP lost $452 million in the fourth quarter of 2008 alone–that the ultimate result of the credit will likely be to push paper prices down as mills churn at full capacity in order to grab as much money from the IRS as it can.”

  36. So on the issue of Climate Change:

    Bottom line,
    Natural factors alone, simply don’t explain what’s going on.
    greyfalcon.net/forcing4.png
    greyfalcon.net/solar1.png
    greyfalcon.net/enso.png
    greyfalcon.net/milankovitch
    greyfalcon.net/cosmic
    greyfalcon.net/cosmic2
    greyfalcon.net/spencer

    Also if it were so “unscientific”, wouldn’t you think there would be atleast one scientific institution, anywhere on the planet who disagrees?
    en.wikipedia.org/wiki/Scientific_opinion_on_climate_change#Statements_by_dissenting_organizations

    Additionally,
    Even if global warming is too complex an issue to wrap one’s head around, it’s not hard to point out that rapidly increasing the amount of carbon in the ocean 1/3rd higher than it’s ever been in atleast 800,000 years can have negative consequences on the ocean.
    nature.com/nature/journal/v453/n7193/full/nature06949.html
    sciencedaily.com/releases/2008/05/080521105251.htm
    sciam.com/article.cfm?id=more-acid-ocean-corrodes-sea-life
    And I’m pretty sure we don’t want to screw up the carbon cycle in the ocean.
    greyfalcon.net/carbon2

    Kinda sad though how often the argument devolves into “The science is automatically invalid, because it doesn’t match my political ideology”.
    greyfalcon.net/gingrich2
    greyfalcon.net/ideology.png

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