One need not look far to see the federal government and state governments are moving further apart on their approaches to energy policy. More states are looking at ways to encourage the development of affordable domestic energy sources such as natural gas and away from picking winners and losers through arbitrary renewable portfolio standards. By contrast, discussions in Washington, DC surrounding the creation of a new carbon tax have increased.
In response to that, 14 conservative think tanks and advocacy groups, including The Heartland Institute, joined forces to urge Congress to oppose carbon taxes. A study by the Institute for Energy Research points out, “Federal and state governments already have in place many policies that discourage carbon-intensive activities and encourage alternatives, such as gasoline taxes, CAFE standards, and renewable energy mandates. These weaken even the theoretical case for a carbon tax, though advocates rarely include this consideration in their proposals.”
Creating a new tax on carbon will do nothing to fix the debt crisis we are facing. Don’t be fooled. The brunt of a carbon tax will hit the pocketbooks of consumers and workers by driving up the cost of energy and other necessary goods as well as pushing manufacturing jobs overseas. The focus should be on encouraging more energy development by opening more federal lands to development, opposing moratoriums and other regulations on hydraulic fracturing, and eliminating costly renewable portfolio standards.
The open letter opposing carbon taxes, which was released and delivered to members of Congress yesterday, appears below. For more information about this letter or Heartland’s work on energy issues contact Policy Analyst Taylor Smith at 312/377-4000 or [email protected].
This week’s edition of The Leaflet features research and commentary addressing carbon taxes, UTOPIA, streetcar fantasies, the dividend rush, an update on Wisconsin’s Act 10, and seven reasons not to expand Medicaid.
14 Think Tanks and Advocacy Groups Urge Congress to Oppose Carbon Taxes
Dear United States Senators and Representatives:
Recently, several current and former elected officials have called for adoption of a “revenue neutral carbon tax” or a “carbon tax swap.” Under this proposal, a new tax on the carbon content of fossil fuels would be imposed, presumably to reduce carbon dioxide emissions and protect the world’s climate. The revenue raised by the new tax would be offset by reductions in other taxes or simply returned to taxpayers and consumers.
On behalf of the members represented by our organizations, we urge you to oppose efforts to impose a carbon tax, whether “revenue neutral” or otherwise. Enacting a carbon tax, with or without promises to offset the tax burden by reducing other taxes, is a bad idea for the following reasons:
Carbon taxes are job killers. Energy cost is tightly correlated with economic growth, and any increase in the price of energy has negative impacts on job creation, per-capita income, and growth in GDP. Since 80 percent of energy consumed in America comes from fossil fuels, a carbon tax would raise energy costs across the board, hurting every industry and every consumer.
Promises of revenue neutrality will be broken. Reductions in other taxes or programs to rebate to consumers the revenue generated by a carbon tax will almost certainly be temporary, while the new tax rate will rise over time. Promises to cut taxes are rarely kept and are never binding on future legislatures. Accordingly, a newly imposed carbon tax will be revenue neutral only for a short time, and then become a source of rapidly rising tax revenues.
Carbon is already taxed high enough. Americans in every state except Alaska already pay a combined federal and state gasoline tax that is higher than a carbon tax would need to be set at to pay for the negative effects of carbon dioxide produced by their cars and trucks. Opinion polls show the American public are adamantly opposed to paying higher taxes in the name of battling “global warming.” (Diesel and gasoline account for about 29% of total U.S. greenhouse gas emissions.)
Higher carbon taxes cause environmental harm. Carbon taxes force the substitution of wind and solar power for fossil fuels, but these alternative energy sources cause real and substantial environmental damage. Wind turbines, while providing merely 2 percent of U.S. electricity, kill at least 440,000 birds each year, including many endangered species, according to the U.S. Fish and Wildlife Service. Wind power kills a similar number of bats and requires the development of vast areas of pristine land. Solar thermal power is similarly land-intensive and utilizes substantially more water than coal and natural gas power.
Reducing carbon dioxide concentrations in the air causes environmental harm. Plant growth is limited by the amount of carbon dioxide in the air, and the modest increase in atmospheric carbon dioxide during the past century helped make possible record crop production and the expansion of plant life throughout the planet. Reductions in atmospheric carbon dioxide would cause a reduction in crop production, plant growth, and biosphere richness.
Reducing carbon dioxide emissions is unnecessary for three reasons:
U.S. carbon dioxide emissions already are declining. U.S. carbon dioxide emissions are lower than they were at the turn of the century. This decline is accelerating as low-cost natural gas, made possible by the shale gas revolution, induces utilities to replace high-carbon coal power with lower-carbon natural gas power. Other market factors also are inducing a long-term decline in carbon intensity, and no new taxes are necessary to continue this trend.
Reducing U.S. emissions won’t stop or delay climate change. While U.S. carbon dioxide emissions already are falling, emissions in India, China, and other developing countries are rising rapidly, causing global emissions to rise regardless of what we do in the U.S. In fact, increasing energy costs in the U.S. would simply drive manufacturing (and jobs) to India and China, where energy costs are lower and carbon dioxide emissions per-unit of output are higher.
Global warming fears are overstated. Real-world temperatures continue to rise much more slowly than predicted by global warming advocates, and real-world weather and climate data reflect few if any of the predicted negative consequences of global warming.
For these reasons, we the undersigned urge you to oppose efforts to impose so-called “revenue neutral carbon taxes” on American consumers.
The letter was signed by representatives from the following organizations:
*The Heartland Institute
What We’re Working On
One of Utah’s most ambitious municipal broadband programs is facing serious subscribership and funding problems. The Utah Telecommunications Open Infrastructure Agency (UTOPIA), a municipal broadband program organized in 2002 by a group of communities in the Wasatch Front area of the state, is facing massive debt, low enrollment, and, despite millions of dollars in taxpayer investments, difficulties raising enough revenue to keep the system running.
Senior Policy Analyst Matthew Glans examines the problems facing UTOPIA and similar municipal broadband systems. He contends that instead of spending millions of taxpayer dollars on an unneeded municipal broadband system, communities in Utah should focus on using competitive tax rates and business regulations to create a vibrant market that encourages telecom companies to expand their services.
In this new Heartland Policy Brief, Cato Institute Senior Fellow and transportation expert Randal O’Toole examines the efforts currently underway in San Antonio to build new streetcar lines. O’Toole says the forces behind the streetcar lines are overlooking all the inherent problems with a fixed streetcar system. “Streetcar advocates who think new streetcar lines will be anything other than a subsidy to contractors and a few property owners (who will also benefit from other TIF subsidies) are fooling themselves. Slow speeds , limited numbers of seats, and inflexibility make streetcars inferior to buses in every respect except in their ability to consume large amounts of taxpayer money.”
Companies Rushing to Pay Dividends Before Expected Tax Hikes
In this article from the Heartlander digital magazine, Steve Stanek, editor of Budget & Tax News, examines the rush by many companies to release special dividends to shareholders in 2012 ahead of the end of the year, when tax rate cuts approved during the George W. Bush administration will end unless Congress and President Barack Obama agree to extend them.
Stanek discusses how and why companies are moving to avoid the higher tax and the possible effects of the tax. Stanek spoke with economist Robert Genetski, who “said businesses and investors are signaling ‘the ball has started to roll. I mean everyone is figuring out ways to avoid as much of the tax hike as possible. That’s what’s so damaging about this. The methods that are used to do this are destructive of economic growth. People don’t go to work to pay taxes, and they work hard to avoid taxes.'”
Senior Fellow Maureen Martin, J.D., evaluates Wisconsin’s well-publicized Act 10 legislation, which at the time it was proposed was predicted by opponents to have dire consequences on educational quality. In this Policy Brief, Maureen describes how these predictions did not pan out, and how stories of success are continuing to accumulate.
Maureen writes, “Act 10 reduced state funding for local school district K-12 education but also gave school districts tools to reduce their spending.”
In this Forbes.com column, Merrill Matthews, a resident scholar at the Institute for Policy Innovation, runs through seven reasons states should not expand their Medicaid programs. He writes, “Currently, nine states have rejected the Medicaid expansion and six are leaning against it; 13 have said yes and four are leaning toward it.”
The seven reasons he gives for not expanding Medicaid are, in short:
1. Medicaid Is Bad Coverage – Medicaid is the worst health insurance coverage in the country, and Obamacare did nothing to fix its many problems.
2. The Exploding Medicaid Population – Medicaid currently covers more than 70 million Americans; Obamacare increases that number by an estimated 17 million almost immediately.
3. The Woodwork and Crowd-Out Effects – Those Medicaid growth projections are likely low, as eligible people are likely to “come out of the woodwork” to join the program.
4. The Cost to State Budgets – Medicaid spending has been growing at about 8 percent a year, compared to economic growth of 1 percent to 2 percent.
5. Federal Controls – While a bipartisan coalition of governors has asked Washington for more flexibility over their Medicaid program, Obamacare doubles-down on federal control.
6. Rampant Fraud – Medicaid fraud is rampant and will only get bigger under expansion. No one knows for sure how big the Medicaid fraud problem is, but estimates put it in the range of $60 billion a year.
7. Loss of State Sovereignty