Carbon Tax Could Come After Fiscal Cliff Deal

Carbon Tax Could Come After Fiscal Cliff Deal

According to one former member of the White House Climate Change Task Force under President Clinton, President Obama may have plans to implement a carbon tax as soon as the fiscal cliff negotiations are settled. 

Forget the fact that Obama and his minions have repeatedly protested that they won’t press for a carbon tax, Paul Bledsoe writes:

… the economic advantages of a carbon tax are so manifest that it is still possible, once the fiscal cliff negotiations are finished and talks turn to a truly transformative tax reform deal, that leaders in Congress will begin to reconsider it, especially it if is marketed on economic grounds.

Bledsoe continues that even the oil companies support the idea:

In fact, major oil companies, who played a powerful role in killing cap and trade and oppose a gasoline tax, generally favor a carbon tax as part of overall tax reform, as do many others segments of corporate America. A carbon tax is also supported by many economists from both parties. Arthur Laffer, Gregory Mankiw, and Douglas Holtz-Eakin are just a few of the politically prominent Republican economists to speak favorably about a carbon fee.

He states that a tax on carbon is better for overall US economic growth than the mix of higher taxes on work and capital. And Bledsoe avers that the U.S. would be better off in other ways:

Such a tax may prove effective in producing a more robust U.S. clean technology sector and reducing greenhouse gas emission (RFF estimates a 10 percent drop in emissions over business as usual by 2020 from a $25 a ton CO2 tax)–but its main selling points are fiscal and budget policy.

Here’s the downside, as explained by Kenneth Green:

There would be virtually no environmental benefits to unilateral greenhouse gas emission reductions by developed countries (whose GHG levels are already flat and slowly declining), while developing countries are pouring out virtually every kind of pollutant with joyous abandon… A carbon tax would also have limited impact: If $4-per-gallon gas won’t reduce consumer demand, how is adding another 10 cents, 50 cents, or dollar going to do so? … High energy costs reduce economic productivity and are passed along to consumers in everything they buy, from medical treatments to food and clothing… Most analysis shows that energy taxes are highly regressive… Energy taxes also make countries less competitive when it comes to exports.

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