A new study by the Institute for Energy Research highlights several potential theoretical and practical problems with enacting a revenue-neutral carbon tax, which the study’s author said could be a “cure worse than the disease.”
“The dismal record of the U.S. government in implementing efficient climate change policies is hardly evidence in favor of a massive new carbon tax (or cap-and-trade program),” wrote the study’s author, IER Senior Economist Robert Murphy.
A growing number of academics and policymakers champion a carbon “tax swap,” according to the study, which aims to use revenues from a new carbon tax to reduce some existing taxes.
“[S]uch a new program will be abused in the political process, and will not be tailored to the recommendations of climate scientists and environmental economists,” Murphy continued.
According to the study, a revenue-neutral carbon tax swap would make the tax code more convoluted and hinder economic growth.
The size of a new carbon tax would have to be “cut in half” once the damage to the economy is taken into account, according to the study.
The U.S. alone would not be able to significantly slow the growth of global carbon dioxide emissions, the study found.
“One respected estimate suggests that if only half of the world’s governments implement the ‘optimal carbon tax,’ then the economic cost of achieving a desired environmental objective will increase by 250 percent,” reads the study.
The federal government and the states already have in place many policies aimed at cutting carbon emissions, like gasoline taxes, CAFE standard and renewable energy mandates, weakening the case for enacting a carbon tax.
There has been some speculation that a carbon tax could be enacted during the lame-duck session of Congress if proponents can gain sufficient Republican support.
“A carbon tax … might be more palatable than higher corporate taxes, higher income taxes, higher payroll taxes,” Alden Meyer, director of strategy and policy for the Union of Concerned Scientists, previously told The Daily Caller News Foundation.
“The only way it could go through is if there was some kind of grand bargain between the Democrats and the Republicans and they agree there has to be some revenue element in the package,” Meyer added.
Some on the right have expressed support for a carbon tax, including former Reagan Secretary of State George Shultz.
“In recent years, more and more self-described conservatives, who generally embrace the free market and are suspicious of taxation and government regulation of business, have come out in favor of a carbon tax,” writes Murphy, the report’s author. “Conservative proponents of the free market, of all analysts, should be wary indeed of any plan to introduce a new carbon tax in the name of promoting economic growth.”
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