A commenter over at Ezra Klein’s blog asks:
Again, I’m curious about the reasons for conservatives advocating a tax instead of cap and trade. Why is one more palatable than the other for them?
Because it’s a stealth tax cut.
Make no mistake, of course – when it comes to carbon control policy, conservative viewpoint for the past decade or more has been a variety of do-nothingism/free-market panaceas/”we need to study it more”/etc. However, when carbon control policy becomes inevitable, carbon taxation becomes the more popular alternative among conservatives and moderates as opposed to cap-and-trade.
This is because carbon taxation is inevitably paired with reduction in other taxes, to offset the overall tax burden upon the public. Which in and of itself is fine and good. However, the important thing about carbon taxation is that it is, in essence, a wide-ranging sin tax, and sin taxation exists both to profit off of behaviour society decides it wants less of and to serve as motivation to cease practicing that behaviour.
Consider a hypothetical. I am a citizen of Whereveria, paying twenty-five percent of my income out via income tax. Now, say Whereveria institutes a carbon tax, designed to replace a portion of my income tax, and that my carbon usage, being typically Western and more wasteful than it should be, generates taxation equal to, say, ten percent of my income. Whateveria, not wishing to create an onerous tax burden, institutes its carbon tax at the same time as it cuts income taxes by ten percent. Now, my tax burden personally hasn’t changed; I’m still paying out twenty-five percent of my income in taxes, it’s just that fifteen percent of it is income tax and ten percent is carbon tax.
But. Say also that I decide to be environmentally responsible and reduce my exposure to the carbon tax. I buy a hybrid car, install solar panels, re-insulate my home to make it more efficient, do other vaguely hippie-esque things, and so on and so forth. My carbon taxation payment drops from ten percent of my income to, oh, let’s say three percent. I’ve just dropped my overall tax exposure to eighteen percent of my income from twenty-five percent; in short, I’ve given myself a twenty-five percent tax cut, and the state has no option to recover more income from me short of raising income taxes for everybody, which isn’t going to happen both because it would still create an onerous tax burden for those unable to reduce their carbon emissions easily and because tax hikes have become something only Commie-Nazis do nowadays.
Furthermore, due to the nature of carbon emissions reduction, many of the most efficient methods of reduction are those most easily undertaken by – guess who – the upper classes. Rich people can more easily afford to buy an electric car, to rejigger their home to make it environmentally friendly, to buy carbon-friendly organic food, and all the rest of it. Poor people? Have to keep scraping along on a day-to-day basis because they have trouble generating the capital for a big lifestyle outlay that would positively affect their carbon taxation exposure. So they’ll just keep chugging along.
Does it make more sense that David Frum supports carbon taxation over cap-and-trade now?