Are Republicans Dumb Enough to Support a Carbon Tax?


When it comes to taxes, Republicans really do play the stupid party to the Democrats’ evil. If Democrats propose raising taxes, Republicans trip over themselves to offer to sharp contrast by offering to raise taxes a bit less. CF&P President Andrew Quinlan highlighted the latest example of this strategic brilliance in Forbes:

[I]t’s not just those on the left pushing for the tax. A few conservatives and Republicans are also quixotically jumping on the bandwagon.

The American Enterprise Institute, for instance, has recently hosted a series of events designed to brainstorm ways to sell the public, and in particular small government conservatives, on the idea of a tax on carbon. Former GOP Congressman Bob Inglis, who proposed a carbon tax bill while in Congress before he was defeated by a Tea Party primary challenger, has teamed up with supply side economist Art Laffer and created a new institute to push for carbon taxes.

The motives of the left in pushing for a tax are easy to understand, they want more “revenue” to spend. …The conservatives, in contrast, claim to want only a revenue neutral tax, trading carbon taxes for reductions in other, more economically destructive, tax rates, such as on income. In theory this is not a bad argument, but in practice it is rather naive.

If the political climate was such that cap-and-trade or other big government carbon regulations were on the horizon, proffering a more economically efficient carbon tax as an alternative might not be a bad strategy from a do-the-wrong-thing-in-the-least-destructive-fashion perspective. But that is not the case. Cap-and-trade is currently a nonstarter, and if the legislative will existed to undo destructive EPA carbon regulations — such as a proposed cap on carbon emissions for new energy plants — then it wouldn’t be necessary to even offer an alternative. After all, none on the left who otherwise support these EPA regulations are going to trade them away, even for a new tax.

More generally, the very idea of offering a new tax in exchange for lower rates elsewhere is flawed. Even if leftists agree to lower taxes on income to keep a new carbon tax revenue neutral, there’s nothing to stop them from raising rates in the future. On the other hand, given the love politicians have for taxes, eliminating an entire tax would be much harder…

He goes on to explain how the logic for a carbon tax doesn’t work even if you assume high-end estimates for the costs of carbon emissions, a point bolstered now by a new study in the journal Nature Climate Change:

A typical export from Western countries to developing giants is machine tools, which are then used to make products such as toys.

These machines are made in the West using comparatively low-carbon industrial techniques.

But when they are plugged in and used, they are usually powered by coal-fired electricity, the dirtiest of the main fossil fuels.

In such conditions, a carbon tax would be counter-productive.

To do so could prompt the developing country to make its own machines, which are likely to be more energy-intensive. This in turn would drive up the carbon tax on what was manufactured.

That is likely just scratching at the surface of the unintended consequences a carbon tax would produce. Though its intended consequence – raising the price of energy – is bad enough by itself to warrant rejecting this latest foray into bipartisan economic destruction.

Brian Garst

Brian Garst is the Director of Government Affairs for the Center for Freedom and Prosperity, a non-profit think tank dedicated to preserving tax competition and free markets. He also blogs at BrianGarst.com.

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