Wednesday, 17 October 2012

Why Conservatives Should Support a Carbon Tax, Part I

A recent poll by the Pew Research Center shows an increase in public belief that climate change is occurring. This was true across a wide range of groups, including conservatives and Republicans.

This thus seems like a propitious time to launch the first in a series of posts urging conservative Republicans to support a carbon tax. I have believed all along that a carbon tax can be completely consistent with conservative principles of limited government. A carbon tax is supported by many conservative economists, including Gregory Mankiw, the Harvard professor that served as chief economic advisor to George W. Bush (and an advisor to Mitt Romney), Kevin Hassett, a Senior Fellow at the American Enterprise Institute (and an advisor to Mitt Romney), and Glenn Hubbard, dean of the Columbia Business School (and an advisor to Mitt Romney). I could go on.

The reason why these and many other prominent conservatives support a carbon tax is because it is a tax on consumption, and not production, which is what the income tax does and what the corporate income tax does. Most of the conservatives who support an income tax only support it if it replaces or reduces some income tax, making the potential carbon tax revenue neutral. There is even talk that Grover Norquist, the uber-libertarian, would support a carbon tax if it replaced income or corporate income taxes. A New York Times oped by Yoram Bauman and myself argued for a revenue-neutral carbon tax. A $30 a ton carbon tax would bring in at least $150 billion per year (at least at first, because over time, if a carbon tax reduces consumption, the revenues from a carbon tax would decline), making it possible to fund tax cuts -- at least a 10% decrease in personal and corporate income tax cuts, with plenty left over.

Perhaps most important from the conservative standpoint, this is a way to agree on something with Democrats, and to re-learn the exercise of compromise and bipartisanship. This may not sit well with Tea Partiers, whose raison d'etre is to fight compromise and bipartisanship, but my prediction is that Congressional Republicans are going to emerge on the morning of November 7 the worse for it. The Republican Party may gain some Senate seats, and may even wrest control. But with Democrats defending 23 seats and the Republicans only defending 10, this is supposed to be a good Republican year. A wash would be a defeat, and if the Republicans suffer defeat by underperformance this November it will be because they will be perceived as being the obstructionist party. Initiating and not just accepting a proposal like a carbon tax offers them a way out, and a way forward.

1 comment:

  1. I want to suggest a carbon tax that replaces a flat tax.

    That is, take the carbon tax income each month or each week, divide it by the number of voters, and give it back, the same amount to each voter.

    So voters pay higher prices according to how much carbon they use, and then voters get all the money back -- so it's revenue neutral. But it isn't at all revenue neutral for people who burn a lot of fossil fuels! People who use hardly any get a nice little supplemental income as a reward. People who use a lot pay a lot. But on the whole -- revenue neutral!

    Give everybody a government debit card to pipe the money to, like welfare people get now. That can be your voter ID too. Any time the government refunds you money they can put it on your card, so there are various economies to it.