I used to oppose new environmental and energy taxes. I always believed the climate crisis was very real, but was cautious about any bill that would cause higher energy prices. I understood if people and industries had to pay the true cost of carbon based energy, we would both conserve energy and develop clean energy alternatives. But the economic populist in me just didn't like it. In my mind, we all had to use energy meaning such taxes would be regressive and hurt poorer people.
I was also worried about the political ramifications. I was in 7th grade when Jimmy Carter won the Presidency. I remembered the public reaction when he encouraged people to conserve energy. This caused me to prefer direct and aggressive clean energy subsidies (often abused by special interests - ethanol). I also knew more taxes, except on the rich, doesn't poll well. This may be changing with regard to energy and cap and trade systems- Nate Silver points out the cap and trade bill polls fairly well.
But I've been reading. And I've been learning - such taxes are not per se regressive and can even be progressive if structured correctly.
In my opinion, the Carbon Tax Center does an excellent job debunking myths about a carbon tax including the belief that such taxes would necessarily be regressive.
The wealthy use more energy by far. For example, for every gallon of gas used by the poorest quintile (20%) of households, the richest quintile use three to four gallons. (See Slideshow, Slide #26.) The same holds for electricity, jet fuel, even diesel that fuels the trucks that deliver goods. Carbon taxes can therefore be made progressive, i.e., beneficial to people of below-average means, by redistributing the tax revenues equally to all. A worthy alternative, which Al Gore advocates, is to "tax-shift" carbon tax revenues by reducing regressive taxes such as sales taxes and payroll taxes.
This is true not only of gasoline - people use more energy overall based on affluence
The upward skew in carbon use over the income range comes about because higher-income households don’t just drive more, they also fly more (burning jet fuel), they tend to own bigger (and sometimes multiple) houses to heat and cool, and they buy and use more products that require electricity or industrial fuels to manufacture, deliver and use
I believe rebates or a "tax shift" using carbon/energy taxes paid by poorer Americans to reduce their sales or payroll taxes would make the tax progressive.
The political realities to me are as follows. The climate crisis is very real. There are many prestigious scientists who believe global warming has advanced beyond the point of no return. In fact, a study by Stanford University climate scientists suggests during the next 10-30 years extreme heat waves will be commonplace in parts of the United States.
The political reality is we must quickly find a way to end our addiction to fossil fuels. We may as well get a "two-for-one" while we are at it. That means using clean energy programs to solve other serious national problems such as chronic unemployment.
These are my ideas in terms of how we can get a "Two-For-One" passing a clean energy program while simultaneously helping with unemployment:
- Pass a WPA style jobs bill that would hire tens of thousands of people to install new and energy efficient doors, windows, insulation, and even energy efficient heating and air conditioning in working class and middle class homes at a subsidized cost based on a sliding scale. We could also do this in small business offices/buildings and in public buildings. And we could use such a jobs program to clean up our lakes, rivers, and the Gulf Coast.
- Use such a jobs/clean energy bill to help bring back manufacturing jobs to the United States. We could subsidize such products to a much greater degree if manufactured in the United States. If consumers want products made here, manufacturers will build and move factories here.
- Build a new smart electricity grid we can use to get solar and wind energy from the Arizona desert or the Plains states to cities and small towns across America. Al Gore has advocated for a new "Unified National Smart Grid" electrical infrastructure.
- Invest heavily in new solar energy and wind energy technology.
Another political reality is enormous budget deficits we have in the face of enormous domestic needs (jobs, health care, energy). We must find new sources of revenues and a carbon tax, and/or cap and trade system is one logical revenue source.