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November 13, 2012

Norquist Quickly Reverses Course on Viability of Carbon Taxes

Posted in: Uncategorized

My original working assumption on the subject of a carbon tax, basically a levy on fossil fuel usage, working its way into the fiscal cliff negotiations was that I appreciated the thought, but doubted the reality. It’s not that a carbon tax wouldn’t raise revenue and also contribute in a smart way to reducing greenhouse gas emissions, it just sounded like an underpants gnome solution to the issue of finding a revenue asset Republicans would support. Sure, Greg Mankiw and a couple other conservative academics supported a carbon tax in theory, but it never really advanced past that stage, and anyway far too many conservatives don’t believe in climate science, so this would represent a solution to a non-existent problem.

Then Grover Norquist appeared yesterday with an endorsement of the carbon tax concept.

In a step that may help crack open the partisan impasse on climate change, Grover Norquist, the influential lobbyist who has bound hundreds of Republicans to a pledge never to raise taxes, told National Journal that a proposed “carbon tax swap”—taxing carbon pollution in exchange for cutting the income tax—would not violate his pledge.

Norquist’s assessment matters a lot, and could help pave the way for at least a handful of Republicans to support the policy.

I received a lot of notices of this article, and Norquist’s relative shift. Of course, he just wanted to use the carbon tax as a fulcrum to lower income tax rates, rather than include it as a new revenue stream. But everyone should have waited a minute. Because it took those 24 hours for Norquist to completely reverse course.

…after being criticized by the American Energy Alliance, the advocacy arm of a Koch-supported energy think tank devoted to promoting fossil fuel development, Norquist has completely reversed his statement, saying there virtually “no conceivable way” he could support a tax on carbon [...]

Americans for Tax Reform issued this statement this morning:

“Americans for Tax Reform opposes a carbon tax and will work tirelessly to ensure one does not become law.

Taxing American energy consumption not only opens up a new revenue stream for proponents of big government, but threatens to forever damage the American economy.”

So that’s that. But let’s look at one thing. Norquist’s normal M.O. is to oppose any tax anywhere, even if offset by additional tax cuts, on the grounds that the other tax cuts could eventually get raised later. This nihilist viewpoint should have foreclosed on the idea of a carbon tax from the outset. So why did he go along for 24 hours?

I’ve heard compelling speculation that trading an income tax cut with a carbon tax would swap out a relatively stable source of revenue with one the government would prefer to see reduced over time. That would really depend on how much the carbon tax would replace income taxes. The studies that exist looking at this show that you would not be able to reduce income taxes across the board by very much, not even 1%. You could reduce payroll or corporate taxes a bit more, but not a major amount. The working assumption is that a carbon tax would raise $1.25 trillion over ten years.

If the carbon tax were somehow dedicated to pay for a particular priority, then you could see the same problem you see with our existing carbon tax, the gas tax. That directly funds highway improvements, and with increased fuel economy it’s shrinking over time, causing a major shortfall. These things happen gradually, and it still makes sense to tax things you don’t want to proliferate rather than things you do.

So that’s not the major problem. It’s that conservatives hate taxes as much as they hate talk about climate change.


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