Test the Theory

There are an increasing number of reports about the business community’s growing support for a carbon tax.  Americans for Carbon Dividends, CERES, and the CEO Climate Dialogue along with several environmental groups are urging Congress to pass legislation that would put a price on carbon—CO2 emissions.

According to Axios, 69% of republicans are concerned that “their party’s position on climate will hurt them with younger voters and 43 % …said that their concern about climate change has increased in the past year.”  David Doniger at the Natural Resources Defense Council told Axios…“They see a rising public demand for action and they’re smart enough to know this extreme denial of the Trump era will not last and may be coming to a halt in 2020.”

Maybe they are right and a turning point has been reached but don’t bet on it.  The recent election in Australia is one piece of evidence.  Voters there had a clear choice between pro-growth policies and policies of higher taxes and income distribution.  Growth won.  One way to test the public’s receptiveness for a carbon tax is for Congress to propose and try to pass something like a 25 or 50 cent increase in the gasoline tax since that would apply directly to CO2 emissions.

The reason for skepticism is the reality of how voters are reacting to proposals to raise state gasoline taxes.  Proposals in Ohio, Missouri, and Minnesota for example have run into to fierce resistance from voters.

A study by two European economists captured the reality well.  Given concerns about climate change, “the option of raising gasoline taxes has received greater consideration in the American public policy debate. Gasoline tax increases remain nevertheless highly unpopular. Public resistance to them is at least partly explained by their adverse distributional effects. In developed economies gasoline is generally a necessity good in household consumption. Therefore, gasoline price increases tend to affect the poor more than the wealthy in relative terms. That is, they tend to be regressive.”

While the rhetoric surrounding a carbon tax might initially produce public support, especially given promises returning some proceeds to individuals in the form of cash dividends, the realities of carbon taxes can only be hidden for so long.  The public would soon realize that the taxing mechanism would give Congress another way to feed its spending appetite, would not be as simple and straight forward as promised, and would be gamed by crony capitalists.

So, if Congress can get the public to buy into a gasoline tax increase that would set predicate for moving onto a carbon tax in spite of the fact that it is a scam.  The impact on global CO2 emissions would be trivial since they are increasing as a result of coal fired power units being built by China, India, and other countries while US emissions peaked in 2005. 

Author: billo38@icloud.com

Founder and president of Solutions Consulting which focuses on public policy issues, strategic planning, and strategic communications.

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