Congressman Introduces Carbon Tax Bill

by Marlo Lewis on August 2, 2012

in Features

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Today, Rep. Jim McDermott (D-Wash.) introduced the “Managed Carbon Price Act of 2012” (MCP), a bill imposing a tax on carbon dioxide-equivalent  greenhouse gas (GHG) emissions from producers of coal, oil, and natural gas, refineries, and other covered sources. The MCP has roughly the same long-term goal as the Waxman-Markey cap-and-trade bill, the Copenhagen climate treaty, and California Assembly Bill 32 — an 80% emissions reduction below 2005 levels by 2050.

Under the MCP, covered sources would have to purchase (non-tradeable) permits equal to the quantity of CO2-equivalent GHGs they emit. The Secretary of Treasury, in consulatation with the Secy. of Energy and Administrator of EPA, would “manage” permit prices to ensure that both the long-term and interim reduction targets are met. Permit prices would have to stay within a maximum and minimum “price collar.” Seventy-five percent of the proceeds would be returned to citizens as “dividends,” and 25% would be applied to deficit reduction. A fact sheet, section-by-section analysis, and side-by-side comparison with last year’s version of the bill provide more detail.

A few quick observations. First, the overwhelming majority of Republican members of Congress have signed the Taxpayer Protection Pledge — a promise to the citizens of their State or district not to support any tax increase that is not offset by an equal reduction in other taxes. Because 25% of the proceeds raised by the ‘managed’ carbon tax would be applied to deficit reduction, the MCP is not ‘revenue-neutral.’ Pledge takers cannot vote for the MCP without breaking their promises to their constituents. Even if some GOP lawmakers agree with the bill’s climate policy objectives, few will dare to support it.

Second, as I discuss this week on National Journal’s energy blog, there are only two defensible reasons for economic liberty/limited government advocates to consider a carbon tax proposal such as the MCP. One is if we’re stuck with a choice between carbon taxes and cap-and-trade. Back in 2007-2010, some clever people argued that we had to support carbon taxes because “you can’t beat something with nothing.” They were wrong. We beat cap-and-trade by exposing it as a tax. Why on Earth should we support carbon taxes now, when cap-and-trade is dead?

Some limited government advocates may be intrigued by the possibility of a grand bargain in which a national carbon tax replaces all federal and State anti-carbon regulatory programs. Those include not only the EPA’s greenhouse gas regulations but also the Renewable Fuel Standard, sub-rosa carbon regulations like the Utility MACT Rule (which effectively bans the construction of new coal power plants), California’s EPA-awarded power to meddle in fuel-economy regulation, California’s cap-and-trade program and low-carbon fuel standard, the Northeast States’ regional greenhouse gas regulatory compact (RGGI), and State renewable portfolio standards (RPS).

That the EPA, California, and major environmental organizations would agree to such a bargain is unthinkable. They have spent 40 years fighting for the regulatory mandates they currently administer or influence, not for carbon taxes. The only deal they might accept is one in which they get carbon taxes and carve-outs for regulatory sacred cows.

Perhaps reflecting this reality, McDermott’s fact sheet, section-by-section, and side-by-side contain no hint or suggestion that carbon taxes would replace or preempt other greenhouse gas reduction policies. The MCP is about as DOA as any bill could be.



chilipalmer August 3, 2012 at 1:28 am

I enjoy your work, but was sorry to see you say unelected Grover Norquist’s “tax pledge” was reason number one why GOP wouldn’t sign a carbon tax. We have enough problems with elected establishment GOP members who must be remembered that we the people are the boss. We didn’t elect Grover Norquist. It’s nice for his purposes that he gets his name or organization mentioned so often. However the GOP has enough problems without giving this con artist additional publicity.

Marlo Lewis August 12, 2012 at 10:17 am

Dear chilipalmer,

It is not Grover Norquist who is the con but the two-faced politicians who say one thing and do another. To such ‘representatives,’ politics is a game of fool-the-voter. The Taxpayer Protection Pledge makes it much harder for con men to play this game on a key issue of American politics — taxes and the associated cost and size of government.

When Washington’s tax-and-spenders want to trash the Pledge, they typically say something like: “I took an oath to uphold the Constitution, not to obey Grover Norquist, a lobbyist.” That’s another con job. Grover invented the Pledge, administers it, and monitors fidelity to it. But the Pledge itself is a promise not to Grover but “to the citizens of my State/District.”

The much-maligned Pledge is based on a few simple insights. (1) If people really mean what we say, they’ll put it in writing. (2) Once put in writing, promises are harder to break. (3) Pledge takers will gain a competitive advantage over politicians who don’t or won’t take the Pledge. (4) In time, no Republican candidate will be able to win a primary if he doesn’t take the Pledge. (5) Consequently, in time, the GOP will earn a brand name — ‘the party that won’t raise your taxes’ — that actually means something. Voters will finally have a ‘choice, not an echo.’

In short, the Pledge has helped create real product differentiation between the parties, and instill real discipline within the GOP on taxes. Grover is a ‘public citizen’ — a policy entrepreneur who has protected taxpayers by making politicians more accountable to the people they are supposed to serve. Anyone who tells you different, chilipalmer, is conning you.

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