In response to news reports that the American Enterprise Institute (AEI) is working with the Union of Concerned Scientists and other far-left groups to campaign for a carbon tax in a lame duck session of Congress following the November elections, experts with The Heartland Institute expressed their strong objections to such a plan.
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“The idea of a tax swap – a carbon tax in exchange for a cut in capital gains, for example – is the Holy Grail of many economists. Tax a ‘negative externality’ instead of investment, and everyone wins. Even I agree with that thinking. The problems are:
“(a) Carbon dioxide is not a negative externality, it is a measure of energy use, and energy – as Julian Simon and others have pointed out – is the ‘master resource,’ the single most important input into our economy, the source of prosperity, innovation, and opportunity. Taxing CO2 emissions is WORSE, not better, than taxing capital gains. The only reason to view CO2 as a pollutant is if you believe it causes climate changes that could be harmful to humanity or the natural world. The emerging consensus of scientists and economists is that CO2’s effects are either too small to be noticeable or will produce net benefits, not harms.
“(b) In the history of taxation in the United States, it is difficult or perhaps impossible to find a new tax that has led to the elimination or permanent reduction of an existing tax. New sources of tax revenue invariably result in higher government spending. Taxes and spending are already too high and are contributing to an economic crisis. No one who understands these basic truths can also support a carbon tax.”
“We should never support a new tax in exchange for a cut in an existing tax because experience shows the new tax will be permanent and the cut in the other tax will be temporary. Since 2001 federal spending has soared from $1.8 trillion to $3.8 trillion. This increase exceeds overall economic growth, price inflation, wage inflation, and other economic measures. The pressure should be on cutting spending, not on looking for new taxes.”
“It’s puzzling that allegedly pro-market thinkers would propose to snatch defeat from the jaws of victory in this way. Cap and trade has already been quashed, rightly, and the public wisely expresses great skepticism that any manmade climate change catastrophe is on the way. The economy, meanwhile, is in the dumps and in need of a tax cut, not more taxes – even ones that are supposed to be revenue-neutral for a day or two. To ignore all of that and try to impose a new tax during a lame-duck session is frankly astounding.”
The Heartland Institute is a 28-year-old national nonprofit organization headquartered in Chicago, Illinois. Its mission is to discover, develop, and promote free-market solutions to social and economic problems. For more information, visit our Web site or call 312/377-4000.