I’ve noticed that lots of people talk about a carbon tax and a gas tax as if they’re interchangeable, or the same thing, or connected parts of some larger package.
That’s bad. Please stop it.
A carbon tax is just that: a tax on carbon content. It could take numerous forms, but it’s generally agreed that the best would be to tax as far "upstream" as possible — as close as possible to the sources of carbon-heavy fuels — so as to minimize the number of taxed parties and the possibility of accounting shenanigans. That means a tax on wellheads and mines (and maybe on a few other key industries). The idea is that the cost increases would cascade down through the economy and be fairly widely dispersed. And most proponents also favor a revenue-neutral tax, which would be refunded to citizens in one way or another (direct payments, reductions in payroll taxes, etc.).
That means, when it comes to a well-crafted carbon tax:
- the costs are (relatively) hidden from voters, and
- the benefits are immediately tangible.
That’s a political winner!
Now, consider the gas tax. It has exactly the opposite structure, namely:
- the costs are tangible to voters, present every time they drive past a gas station, and
- the benefits are (relatively) hidden.
That’s a political loser!
A gas tax just seems dumb to me. It’s a huge political risk, levied on a source of carbon for which there is relatively inelastic demand. We ought to be minimizing the political risk and focusing on those areas where demand is elastic.
The one part of Dingell’s proposed carbon tax that actually made me think he was trying to sabotage it is the inclusion of a gas tax. It’s all political downside with very little carbon upside. Voters aren’t gonna dig it.
Carbon tax: yes. Gas tax: no. Discuss.