Can We Afford Cap-and-Trade Taxes?
For some time, we have been beating the drum of carbon taxes, which will be imposed as regulations or legislated in the form of cap and trade. As our nation became engaged in a protracted recession, no one believed “climate taxes” would happen here because it would be pure foolishness. Nobody is foolish enough to tax the engine of our economy in the midst of a recession, right?
When our president was elected, how-ever, it became clear that he wasn’t going to let a little thing like a recession prevent him from going down that road. Since President Obama seems to take his cues from Europe, I began to watch what was happening there to get a sense of where we would likely go in the U.S. In January, we began to document the news reported by our friends in Europe as well as what was happening right here in a bulletin-board thread on our website.
It’s hard to even mention this topic without discussing the basic reason for a carbon tax. The overhyped global-warming issue is the reason/excuse that is used. Because there has been no documented warming in the past 11 years, however, global warming is now referred to as climate change, but by any name the remedy is apparently the same – taxing consumers.
Obama’s goal from the beginning has been to enact a European-style cap-and-trade system as a tax. If you don’t think this type of system is taxation, here’s what Obama had to say: “Under my cap-and-trade plan, electricity prices would necessarily skyrocket.” Testifying before Congress, Obama’s budget director said, “Firms would not ultimately bear most of the costs of the (cap-and-trade) allowances but instead would pass them along to their customers in the form of higher prices … price increases would be essential to the success of a cap-and-trade program.”
As it became obvious Congress was not going to enact cap and trade quickly enough for Mr. Obama, he decided to force their hand through the regulatory process. On April 17, the EPA declared that CO2 and five other greenhouse gases “endanger public health and welfare.” Obama is clearly trying to skirt the legislative process by not allowing the necessary discussion to take place. About cap and trade, lawmakers have stated, “Legislation so far-reaching should be fully vetted and given appropriate time for debate.” Unfortunately, if legislators take the proper amount of time, Obama seems ready to use the EPA ruling under the Clean Air Act to short-circuit the process and accomplish the same objective.
Cap-and-trade legislation is intended to apply to power plants, steel mills or other large emitters of CO2. If taxation occurs through regulation with the EPA invoking the Clean Air Act, however, smaller businesses could also be affected. The Clean Air Act covers “any building, structure, facility or installation” that emits at least 250 tons per year of any regulated “air pollutant.” The U.S. Chamber of Commerce indicates that this threshold is low enough to include one million midsize to large commercial-sector sources such as restaurants, hospitals, schools and office buildings. Under this type of heavy-handed rule making, I wonder what will happen when all of the Wal-Mart haters of the world get their hands on this?
Assuming cap-and-trade legislation is the likely result, what will it cost the consumer? An MIT study looked at the scheme proposed by the president, who projects revenue of $366 billion in a single year. Quoting the study, John Ensign, a U.S. Senator from Nevada, estimated the tax burden on each family would be $3,000 per year. Using an alternative household number given in the MIT study, the annual impact could be as high as $4,560 per year. It is promised that some of the taxed money will be rebated back to consumers, but some of it will also be used for other purposes. Most of us know how effective government rebates are. Once they get the money, they are unable to let it go. So, it’s anyone’s guess as to what our net tax liability will be. Needless to say, it will be painful.
Can we afford another tax? Will manufacturers remain in the U.S., or will they find a less-taxed place in which to do business? IH