Conservative icons take to The NYT to tout the magic of a revenue-neutral carbon tax
In last weekend’s New York Times, conservatives Rep. Bob Inglis (R-S.C.) and Arthur Laffer had an op-ed claiming that a revenue-neutral “tax shift” would make conservatives “the new administration’s best allies on climate change.”
Color me skeptical. Laffer, of course, is a conservative legend, an economist whose curve has given a great many mendacious right-wing legislators intellectual cover in the war on taxes. Inglis is best known for telling Mitt Romney that Mormons aren’t Christians.
It’s notable when prominent conservatives don’t try to deny or downplay climate change. But that’s a mighty low bar to clear these days.
There is a crucial bit of weasel wording here: “If the bill’s authors had instead proposed a simple carbon tax coupled with an equal, offsetting reduction in income taxes or payroll taxes, a dynamic new energy security policy could have taken root.”
It matters a great deal whether a carbon tax reduces “income taxes or payroll taxes.” Energy taxes are generally regressive unless offset. Reducing payroll taxes would provide some progressivity; reducing income taxes would provide additional regressivity. (Many workers pay no income tax at all.) You can bet conservatives would love that. “The good news is that both Democrats and Republicans could support a carbon tax offset by a payroll or income tax cut,” they say. Everything’s in that “or.”
As with many carbon tax fans these days, Inglis wildly overstates the effects of a modest price on carbon:
Nuclear power plants would then compete with coal-fired plants. Wind and solar power would have a shot against natural gas. Trains would compete with trucks. We would clean the air, create wealth and jobs through a new technology boom and drastically improve our national security.
The market-driven innovation that brought us the internet and the personal computer could quickly bring us new, cleaner fuels. A carbon tax that was fully offset (with payroll or income taxes cut by a dollar amount equal to the revenues generated by the new tax) would be as bold as the threat that we face.
“As bold as the threat that we face”? No. It might be bold in today’s political climate, but it is nowhere close to addressing the threat we face. A carbon-negative U.S. by mid-century is as bold as the threat we face. A modest ($15-25) carbon tax is a tiny, tiny step in that direction.
First, we have to remember all the places the price signal created by an upstream tax can be diluted or stymied on the way to consumers — i.e., those who can change their behavior in response to prices. Not every industry or business will pass an increase in operating costs directly on to the next link in the chain. Information failures and split incentives abound. Price signals that begin strong, catholic, and clear become fragmented and faint downstream. For all the hype, an upstream carbon price will deliver fairly little incentive to where the carbon is used — and where opportunities to switch to low-carbon alternatives are most plentiful.
At least, not until you crank the tax up fairly high. How high do you think you could get it before your “best allies” Inglis and Laffer jump ship? High enough?
Second, trains wouldn’t “compete with trucks” unless somebody laid rail. Many if not most carbon-reduction strategies are hostage to infrastructure. You can’t take trains without rail networks; you can’t double renewables without improving the grid.
This is to say — yet again! — that private sector price signals are only one part — perhaps not the biggest part — of a serious climate/energy strategy. You also need massive public investment and performance regulations.
Will Inglis and Laffer (and their conservative brethren) be the administration’s “best allies” in its efforts to pursue investment and regulation? Will they defy decades of conservative “free market” orthodoxy and deep-rooted ties to industry? Again, color me skeptical.
I’ve changed my mind a number of times over the years about what it’s going to take to get serious action. Currently I’m of the opinion that it will take a propitious confluence of a terrified public and a governing coalition of liberals and moderates. Conservatives are going to be bystanders at best, impediments at worst. I’d say history will judge them harshly for it, but there are always people like them doing things like they do, so history’s judgment must not be much of a deterrent.