John Sweeeney argues on the homepage today for the U.S. to adopt a revenue-neutral carbon tax as part of a strategy of moving the world toward carbon taxes.

I find this alternative strategy for dealing with the risks of climate change superior. Note the estimate that “an optimally designed and implemented global carbon tax would provide an expected net benefit of about 0.2% of the present value of global GDP over the next several centuries.” As authors Jim Manzi and Pete Wehner note, that’s “a lot of money,” but given the many ways a real-world regime of global taxes would fall short of optimality it is not a strong reason to go down this road.


I am also skeptical that a carbon tax “could be designed to be revenue-neutral and thus not result in an expansion of government,” as Sweeney writes. Let’s say we reduced payroll or income taxes dollar-for-dollar to account for the new carbon tax. Over the long run, revenue-neutrality seems unlikely to hold because it is easier to raise a tax that already exists than to create one that doesn’t. If you really wanted long-run revenue neutrality, you’d need, I think, to extinguish a comparably large revenue source altogether as part of the deal for creating a carbon tax.