No, A Carbon Tax Cannot Create Jobs, Jobs, Jobs

Published October 10, 2014

A tax on carbon dioxide emissions would destroy far more jobs – and wealth – than it would create, despite the well-intentioned hopes of contributor James Conca.

In a article titled “Can A Carbon Tax Create Jobs, Jobs, Jobs,” Conca argued a carbon dioxide tax would result in a net increase in jobs if the tax revenues were spent wisely. Key to this hopeful prognosis, Conca asserted, is the requirement that a newly imposed tax on carbon dioxide must be revenue-neutral, with carbon dioxide tax collections being offset on a dollar-for-dollar basis by tax reductions in other sectors of the economy.

Conca never explained how merely shifting tax burdens from one sector of the economy to another creates jobs and wealth. Instead, he simply cited three short articles and one longer paper written and published by liberal activists. On important policy issues of the day, however, blindly deferring to self-serving papers written by liberal activist groups, such as the notorious Center for America Progress, is a recipe for disaster. Yes, that is the same Center for American Progress that championed Solyndra and promised Obamacare would lower healthcare premiums, create jobs, and make American families richer.

There are many reasons – economic and otherwise – why a tax on carbon dioxide is a bad idea. Let’s examine just two of the economic reasons.

First, Conca concedes that higher taxes are economically harmful. His solution is to reduce taxes in other sectors of the economy. The problem is the same liberal activist groups who want to implement carbon dioxide taxes oppose corresponding tax cuts. The Center for American Progress, for example, says carbon dioxide tax revenue should be given to the renewable energy industry rather than returned to the American people.

Curiously, the Center for American Progress fails to disclose that it is funded by the renewable energy industry and its founder and chairman of the board has a long and successful career as a renewable energy lobbyist. Conca must first convince his liberal activist group allies to not pilfer carbon dioxide tax revenues before he can plausibly argue that carbon dioxide tax revenues would be returned to the American people. (Good luck on that, by the way, because the Center for American Progress argues very strongly that the renewable energy industrymust get to keep the tax spoils rather than government returning the tax money to the American people.)

Second, even in the unlikely event that government returned carbon dioxide tax revenue to the American people on a dollar-for-dollar basis, this would be revenue-neutral for government but not for the American people. The entire purpose of a carbon tax is to raise the price of inexpensive coal and natural gas so high as to become more expensive than carbon-free wind and solar power. However, if the carbon tax fulfills its goal of raising coal and natural gas prices higher than wind and solar prices, energy providers will no longer use coal and natural gas and energy producers will therefore pay little if any carbon tax.

As a result, consumers will pay dramatically higher energy prices but receive little if any compensating tax cuts in return. American families’ net disposable income will drop, which will reduce spending and destroy jobs in all other sectors of the economy. The only beneficiary of this energy-policy Ponzi scheme will be the renewable energy industry. This explains why the renewable energy industry-funded Center for American Progress supports the Ponzi scheme so much.

No credible economists claim that reducing American households’ disposable income will grow the economy and create jobs. Yet taxing carbon dioxide sufficiently to reduce carbon dioxide emissions will by purpose and designdramatically raise energy costs in a manner that will substantially reduce American household income while generating few corresponding tax rebates. Economically, all that will be accomplished will be poorer American families, economy-wide economic contraction, jobs destroyed in virtually every American industry, and a Solyndra-style transfer of wealth from hard-working American consumers to incompetent, uncompetitive, politically connected renewable energy companies.

It is a nice thought, James Conca, but no, a carbon tax cannot create jobs, jobs, jobs.

[First published at Forbes.]