Speculation Mounts Obama May Offer Keystone Pipeline-Carbon Tax Deal

Canadian Financial Post editor Terence Corcoran recently suggested that President Barack Obama may be preparing a deal to approve the Keystone XL pipeline from Canada to the Gulf Coast in exchange for a carbon tax.

“I see new taxes coming in the United States, including an energy or carbon tax, to try to cover the deficits,” said Corcoran. “The new energy tax would serve as partial cover for President Obama’s approval of the Keystone XL pipeline.”

Whether Democrats could woo enough Republicans to strike such a deal is as yet unclear.  In the past, some Republicans have expressed interest in allowing a carbon tax in exchange for tax cuts elsewhere. As the Wall Street Journal reported last August:

Some of the most vocal supporters of a carbon tax are conservatives. One of Mitt Romney’s economic advisers, Harvard economist Greg Mankiw, is a huge fan of raising taxes on activities that are seen as undesirable–say, polluting the air–and cutting taxes on desirable activities, like working harder. So is supply-side economics guru Art Laffer. Former South Carolina Rep. Bob Inglis, a Republican, just started a whole think tank to push the approach.

But as Grover Norquist, president of the influential Americans for Tax Reform, has said, “Their intention is good, but they don’t read a lot of history. They don’t notice that all new taxes are permanent and they never displace other taxes.”

A report last year by the conservative Heritage Foundation found that a carbon tax would disproportionately hurt poorer Americans, stymie American manufacturing, and produce nonexistent reductions in carbon emissions.