Could a carbon tax find its way into Obama’s tax reform effort?

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Michael Bastasch DCNF Managing Editor
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President Obama has called for a “grand bargain” on tax reform, with lower corporate tax rates and more infrastructure funding, but so far he is not signaling an interest in the congressional push for carbon taxes.

Obama’s tax plan involves lowering the corporate tax rate from 35 percent to 28 percent for companies and 25 percent for manufacturers, along with a slew of tax credits including benefits for bringing jobs back home and developing renewable energy.

“We’ll keep creating good jobs in wind, solar, and natural gas that are reducing energy costs, reducing dangerous carbon pollution, and reducing our dependence on foreign oil,” the president said Tuesday while outlining his plan in Chattanooga, Tennessee. “Now is not the time to gut the investments in American technology that have brought us to this point — now is the time to double down on renewables, and biofuels, and electric vehicles, and the research that will shift our cars and trucks off oil for good.”

Renewable energy funding has been heavily criticized for losing taxpayer dollars in failed investments, such as Solyndra, and for subsidizing uneconomical energy sources.

“Doubling down on renewable energy has got to be the dumbest idea in a speech full of dumb ideas,” said Myron Ebell, director of energy and global warming policy at the Competitive Enterprise Institute. “The president challenges Republicans to come up with better ideas, but he has rejected all of their much better ideas on reducing the incredibly costly EPA regulations that are stifling innovation, new business start-ups, and job creation.”

Daniel Kish, senior vice president for policy at the Institute for Energy Research said Obama remarks were the “same stuff he’s been saying for five years now about how he wants to increase taxation on the kind of energy people want to use — and do use in this country — and instead subsidize the sorts of energy that he likes.”

“The things that stand on their own merits, you whack ‘em in the knees,” Kish added.

One aspect of tax reform that President Obama left out of his speech were tax benefits for oil and gas companies, which he has criticized in the past. He has bashed the industry for receiving $4 billion in tax subsidies, which industry representatives pushed back against.

“With a 44 percent effective income tax rate, America’s oil and natural gas industry pays its fair share and then some,” said Stephen Comstock, director of tax policy at the American Petroleum Institute. “We urge Congress and the president to make the tax code fair and recognize the benefits of domestic energy production.”

A “grand bargain” on tax reform is exactly what some conservatives have feared would be the vehicle through which Democrats enact a tax on carbon dioxide emissions. Carbon tax proposals have been introduced in both houses of Congress.

California Democratic Sen. Barbara Boxer and independent Vermont Sen. Bernie Sanders introduced a carbon tax bill that would impose a gradually rising fee on each ton of carbon emitted and use the revenues to fund green energy development.

“He’s got plenty of friends on the outside of these legislative bodies here in town that will be pushing for a carbon tax,” Kish told The Daily Caller News Foundation. “The only way he can pay for the massive increase in government he foresees is to tax energy.”

However, even Kish said that he did not believe a carbon tax would be part of the tax reform bargain, as the Obama administration has repeatedly denied having plans to propose such a tax.

“President Obama’s idea of a grand bargain seems to be more federal revenue to fund more spending on job training or infrastructure programs,” Andrew Moylan, senior fellow at  the R Street Institute, which has advocated  a carbon tax. “Unless the president changes course and signals an openness to a revenue-neutral carbon tax with reform of EPA’s regulatory powers, I suspect there’s no carbon tax bargain to be had.”

Even if the administration has not publicly announced plans for a carbon tax, interest on Capitol Hill for the tax has been “creeping up,” according to Montana Democratic Sen. Max Baucus, chairman of the Senate Finance Committee.

Baucus also said that when it comes to tax reform “everything is on the table,” including a carbon tax.

“There are more members of the Senate now who openly talk about that than I have experienced. It is creeping up a little bit. Is that going to rise to the level of where it is a very strong, serious provision? I don’t know. But I am not going to pre-judge it,” Baucus said at a Christian Science Monitor event.

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