What if there were a policy that could cut future deficits, slash taxes, eliminate wasteful government spending and reduce climate change? As sequestration kicks in, you’d think every politician in Washington would be desperate to embrace such a win-win-win-win.
Last week, the Brookings Institution’s Adele Morris laid out what an intelligent tax on carbon emissions could accomplish, and the results will astonish anyone — seemingly much of Congress — who hasn’t given the idea the consideration it deserves. Morris proposed starting with a $16-per-ton charge on carbon dioxide, setting it to rise by 4 percent annually and using most of the money to cut corporate taxes and the deficit.
Want to slash government spending? The tax would replace the inefficient web of clean technology subsidies that overspend the country’s wealth on electric cars and biofuels. Morris reckons that would save about $6 billion a year.
Want to get rid of government regulations? A carbon tax could justify suspending the Environmental Protection Agency’s carbon dioxide program, which will proceed if Congress continues to refuse to establish better policy.
Want to cut the deficit? The plan would decrease it by $815 billion over two decades.
Want to reduce carbon emissions? Morris calculates that, though energy prices would hardly skyrocket, the tax would lead to 12 percent fewer emissions over two decades, relative to what’s likely to happen. Capital would flow into cleaner energy because consumers would demand it.
Want to cut taxes? The plan would finance a seven-point drop in the corporate tax rate, the most economically distortional on the books.
For years, conventional wisdom has casually dismissed a carbon tax as politically unfeasible. But if Republicans could say they lowered taxes, slashed the deficit and cut spending, and if Democrats could say they did something serious about carbon emissions, each side could claim a politically helpful narrative — or at least one attractive enough to allow politicians to suspend the demagoguery and shortsightedness for a bit.
The Washington Post (March 3)