Carbon Tax could raise $1.5 Trillion for the US government. No wonder politicians drool over dire predictions.

Why do we need a carbon tax? A study by John Reilly candidly “explains” (albeit indirectly) why this is not and has never been about the environment. It’s all about power and money — specifically $1,500 billion dollars of it over 10 years. What better excuse to raise funds for politicians? They pretend to save the planet and use the funds to buy votes from people who don’t realize that they themselves pay for the “free” handouts — if not with their dollars, then with their jobs.

This is another piece of magic-pie economics:

A carbon tax would take pressure off Congress to find “tradeoffs” between closing the deficit gap and reviving the economy, according to John Reilly, an author of the study. “Congress will face many difficult tradeoffs in stimulating the economy and job growth while reducing the deficit,” Reilly, the co-director of MIT’s Joint Program on the Science and Policy of Global Change, said in a statement. “But with the carbon tax there are virtually no serious tradeoffs. Our analysis shows the overall economy improves, taxes are lower and pollution emissions are reduced. The study found that taxing carbon at $20 per ton would generate $1.5 trillion in revenue in a 10-year period. That could be used to reduce corporate and personal income taxes and maintain social services spending, all while reducing the deficit.”

So if there are no tradeoffs, why not make the price $40/ton? Why not $100? $1,000?

The report writers assume that governments would use the revenue to decrease other taxes, so it would not increase the size of government. But putting aside the fact that governments are all too willing to promise cuts they never deliver, it’s never good policy to make policy for the wrong reason. There are always perverse outcomes. If the US wants a flat tax, then do suggest one, but don’t make a monster out of a fertilizer-gas.

Since the tax applies to energy use, it would impact everywhere, but have more effect on production of goods than of services. It would “Giddly-Up” the galloping decline of manufacturing in the US. Information services jobs with a low carbon footprint would have an advantage so the tax would generate more lawyers, accountants, and bureaucrats at the same time as suppressing the productive workers who make stuff and what-not. Good if you want “less consumption” but bad if you like air-conditioning, heating, refrigerated food, clothes, cars and holidays.

It might eventually reduce the US reliance on foreign oil, but it would worsen the trade balance because goods would be more likely to be imported from countries without a carbon tax (thus importing oil instead in the form of energy in goods). Foreign factories would presumably have an advantage, and possibly a transport bonus too. Would carbon taxes apply to all ships entering US ports or just US registered boats?

In any case, isn’t the US in possession of bucketloads of shale gas, which is reducing the need for imported oil?

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