Saturday, January 5, 2008

Revenue Neutral Carbon Tax: A good idea, but a risky implementation.


Could we ever trust Congress to pass a TRULY REVENUE NEUTRAL tax? If so, a Carbon Tax would be the single most powerful policy initiative to get this country on the right path towards energy independence.

Lets be clear here, we're not talking about using the enviornmental issue to raise taxes.

A REVENUE NEUTRAL carbon tax would mean that energy would be taxed based on its carbon footprint, and any and all dollars collected would be returned as cash to the people.

Here's how it would work, and what the impact would be.

Suppose for a second, that electricity was taxed, and that every citizen who was current on their tax return filings got a quarterly rebate from the government.

If Electricity prices went up enough, consumption behavior would change (as it has in Europe). The economics of conservation would improve, and some of the alternative energy solutions would get closer to economic viability. The persuasive power of the market would be put to work.

A Carbon Tax would be a progressive energy tax. For example an appartment dweller would get the same amount of refund as a large homeowner, even though their energy usage was less. Individuals and consumers that managed electricity would profit at the expense of the wasteful.

But the biggest question is not IF a Carbon Tax would work, but whether or not we can trust Congress to ever pass a tax that is truly REVENUE NEUTRAL. If not, then the envirnonmental benefits it deliver would come via a a path of economic destruction and a lower standard of living.

We support a REVENUE NEUTRAL Carbon Tax but oppose all other forms of Carbon Taxes.

Properly administered, the cost of adminsitration would be a small portion of the grants we're miss-spending trying to achieve the same objective.

1 comment:

Moving Van said...

Would you EVER trust the government to enact a revenue NEUTRAL tax?

With that single caveat, a carbon Tax is a good idea (said this republican). But that caveat is a big one.

Cap and Trade will prevail. Unfortunately the reason is that it gives political power because the accounting of credits is a nightmare (think IRS) except that you can appoint your party's people into the positions. They is a lot of subtle power in the administration of Cap and Trade.

I hate them both. But of the two, I think I'd rather see a tax because while I doubt it would be revenue neutral, it would have a much lower admininstration cost (tax through the utilities) and the potential for beaucratic creep and political miss-use is less