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.).

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That means, when it comes to a well-crafted carbon tax:

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  • 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.

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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.