Conservatives Reach Common Ground On A Carbon Tax, And That’s The Problem

Published June 19, 2013

A much-anticipated carbon tax debate in Washington D.C. last Thursday brought some much needed clarity to assertions that conservatives should or indeed do support a carbon tax. The timing of the debate couldn’t have been better, as Senate leaders announced on that same day the Senate will hold hearings on a carbon tax next month.

Advocating for a carbon tax were Bob Inglis and Andrew Moylan. Inglis is a former Republican congressman from South Carolina who was trounced in the 2010 Republican Party primary – 71 percent to 29 percent – even though he was running with all the advantages of the incumbency. The seeds of his defeat were sown when he frustrated grassroots conservatives by frequently advocating for liberal programs. Moylan is a senior fellow with the recently formed R Street Institute. R Street advocates for free markets while frequently working closely with environmental activist groups.

David Kreutzer and I took the stage opposing a carbon tax. Kreutzer is a research fellow in energy economics and climate change at the conservative Heritage Foundation.

Only a relative few conservatives support a carbon tax under any conditions. Conservatives understand there are many troubling aspects of such a levy. Also, conservative legislators understand that voters will severely punish them if they support a carbon tax. Reasonable minds can disagree about whether the totality of Inglis’ congressional voting record qualified him as a conservative, but his shellacking in the Republican primary despite all the advantages of the incumbency shows what happens to self-professed conservatives when they support such troubling policies as a carbon tax.

By the end of the debate, the two opposing sides reached some very significant common ground. Most importantly, Inglis and Moylan conceded several prerequisites had to occur before they would support a carbon tax proposal. Those prerequisites include (1) a carbon tax must be revenue neutral, with all collected revenues offset by reductions in payroll taxes and capital gains taxes (and NOT offset by liberal “targeted” tax cuts), (2) government must scrap all existing and planned regulations and restrictions on carbon dioxide emissions, (3) government must eliminate subsidies for low-carbon and carbon-free energy sources and (4) government must impose similar tax penalties on other energy sources, such as appropriate tax penalties on wind turbines for bird kills and land conservation shortcomings, and solar thermal power for water depletion.

The debate clarified that those four prerequisites are absolutely crucial and non-negotiable, even among carbon tax supporters. Take any one of those prerequisites away, Inglis and Moylan pledged, and they will vigorously oppose a carbon tax. This is a very, very important point that must be emphasized each and every time the assertion is made that some Republicans or conservatives support a carbon tax. Inglis and Moylan agreed these are not initial wish-list items that are subject to negotiation. Instead, these are non-negotiable prerequisites that must be guaranteed in stone before any serious discussion of a carbon tax can occur. Any proposal that does not guarantee all of these prerequisites up front is a non-starter, Inglis and Moylan agreed.

The prerequisites that Inglis and Moylan require bring us closer to agreement on the overall question of a carbon tax. Nevertheless, serious obstacles remain.

First, there is every reason to believe liberals will consider it a political non-starter to provide an equal amount of tax relief in the form of payroll taxes and corporate gains taxes. Once conservatives signal that a carbon tax is in play, liberals will morph any proposed payroll tax relief and corporate gains tax relief into either new spending commitments or “targeted tax relief” that merely fund liberal causes. Inglis and Moylan insist they will only support a revenue-neutral carbon tax swap that provides across-the-board payroll tax cuts and corporate gains tax cuts, but there is no way liberals will allow this to happen.

Second, government would very likely jack up taxes soon after a carbon tax swap even if liberals did agree to an initial revenue-neutral tax swap that reduced payroll taxes and capital gains taxes. Our federal budget deficits remain alarming, our federal debt continues to grow, and it is quite unlikely that liberals will allow the spending cuts necessary to rein in our deficits and debt without tax increases. Ultimately, liberals will beat the drum for more taxes and will likely get them. Any short-term tax relief gained in a tax swap will be quickly abandoned. We will be left with the double whammy of higher taxes throughout the economy and new, punitive taxes discouraging utilization of our most economical, affordable energy sources.

Third, the whole point of a carbon tax is to discourage the use of inexpensive carbon-intensive energy sources. Yet when a carbon tax induces power providers to switch to expensive low-carbon or no-carbon energy sources, government collects no carbon taxes and therefore provides no carbon tax relief. The economy suffers as it is punished by expensive low-carbon and no-carbon energy, yet consumers and taxpayers receive no compensatory tax relief because the economic punishment is taking the form of higher energy prices rather than carbon tax collection. The high costs of a carbon tax will greatly exceed the limited compensatory tax relief promised.

Fourth, Inglis and Moylan did not provide a carbon tax rate or a formula to determine the rate. Once conservatives agree to a carbon tax, liberals and global warming activists will almost certainly use junk science, use junk economics and engage in political games to claim the highest possible negative externalities for carbon dioxide and place the highest possible price on carbon emissions. Accordingly, a carbon tax will not put a fair and accurate price on carbon dioxide’s negative externalities, but will instead punish and induce the abandonment of affordable energy sources far beyond what is economically and environmentally justified.

Fifth, the net effects of carbon externalities are beneficial rather than harmful. Carbon dioxide itself is fertilizer for the biosphere. As we add a little carbon dioxide to the trace amounts already in the atmosphere, crop production increases, trees and grasslands flourish and deserts recede. Moreover, a warmer planet has always benefited human welfare more than a cooler planet. Indeed, during the past several decades as our planet modestly warms and continues its recovery from the Little Ice Age, tornadoes have become less frequent and severe, hurricanes have become less frequent and severe, droughts have become less frequent and severe, crop production has set all-time records, etc. Any asserted negative externalities to carbon dioxide-induced global warming must also take into account the demonstrated benefits of global warming. The net equation is positive, rendering a proposed carbon tax economically unjustifiable and foolish.

Sixth, liberals will not abandon EPA regulations and other heavy-handed carbon dioxide restrictions. We can entertain ourselves and engage in an exercise of wishful thinking regarding a carbon tax that nullifies such heavy-handed government programs, but there is no way that liberals and global warming activists will agree that EPA cannot regulate and restrict carbon dioxide emissions. In the real world, a carbon tax will come in addition to – rather than instead of – EPA regulations, presidential executive orders and other costly and restrictive government programs for which there is no tax relief.

Seventh, liberals will not abandon subsidies for wind power, solar power, etc. See my sixth point above.

Eighth, Inglis and Moylan provided no formula for determining similar taxes to account for the negative externalities created by wind turbines and other low-carbon and no-carbon energy sources. Just as liberals and global warming activists will almost certainly assign a much higher price on carbon dioxide externalities than is economically or environmentally justified, they will almost certainly assign a much lower price on wind power, solar power and biomass externalities than is economically or environmentally justified. Proof positive is the federal government’s stringent punishment of oil and natural gas companies if they inadvertently harm a few common birds compared to their giving a free pass to wind power companies that foreseeably and by design kill hundreds of thousands of birds each year including many endangered and protected birds such as bald eagles and California condors.

Ninth, to even begin a discussion on a carbon tax before receiving iron-clad guarantees on all of the Inglis and Moylan preconditions merely encourages, and indeed guarantees, an end product that meets few if any of the Inglis and Moylan preconditions. After Congressional horse trading is over and Congress enacts a punitive carbon tax that bears little resemblance to the terms and conditions of the carbon tax advocated by Inglis and Moylan, Inglis and Moylan will tell us, “Don’t blame us; THIS isn’t the type of carbon tax we advocated.” Nevertheless, it is foolish to assume or assign plausible credibility to the notion that liberals will not use the Inglis and Moylan proposal as cover to completely transform the plan, claim conservative support, and then pick off the few Republicans necessary to impose a carbon tax that bears little resemblance to what Inglis and Moylan are now advocating. Indeed, the media ALREADY publishes story after story claiming many conservatives support a carbon tax, without even hinting at all the prerequisites Inglis and Moylan pledge to require. Moylan and Inglis encourage the media to spread such inaccurate propaganda by calling media attention to a proposed carbon tax they realize, or should realize, will never in the real world meet their necessary prerequisites.

All of these points bring us back to the most important and emphasized factor in the debate – that each and every one of the Inglis and Moylan preconditions is a non-negotiable prerequisite for a carbon tax even among the few conservatives who may support one. Media reporters and global warming activists who claim many Republicans or conservatives support a carbon tax rarely mention these necessary preconditions, even though these necessary preconditions are not included in any of the proposals working their way through Congress. This is like conservatives saying “We will support a Joe Biden-Hillary Clinton ticket in 2016 if they support tax cuts, massive spending cuts and smaller, less intrusive government,” and then having the media spin this as “Even conservatives support a Biden-Clinton ticket in 2016.”

My greatest fear about the Inglis-Moylan carbon tax proposal is that by opening up the discussion to political mischief and the machinations of politicians, Inglis and Moylan will set into motion the imposition of a punitive tax that will bear little resemblance to the one they are proposing. This political mischief is foreseeable and unavoidable. Inglis, Moylan and any other self-professed conservatives cannot thereafter claim innocence when politicians morph their fragile, idealistic plan into a liberal bludgeon with which to punish consumer living standards, conservative principles and the U.S. economy. Conservatives should know better, which is why very few true conservatives support any form of a carbon tax.

[Originally Published on Forbes]