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By Robert Rapier on May 13, 2009 with no responses

Raise Wages, Cut Carbon Bill

I don’t normally post press releases that are e-mailed to me (I get 4 or 5 every day), but this one is important to me. (See my essay The Case for Higher Gas Taxes for my revenue-neutral proposal which is along the same lines as the bill that has now been filed).

On this topic, I am also currently reading Jeff Rubin’s new book Why Your World Is About to Get a Whole Lot Smaller and Rubin makes the argument that with a tax on carbon emissions, you can then put carbon tariffs on high emitters like China. In this way, many of the high energy industries – such as steel manufacture – will become much more competitive back in the U.S. because we are able to do it a lot more efficiently. This will also incentivize developing countries to become more efficient. I will elaborate when I review the book.


Bill Raises Wages and Cuts Carbon, Improves National Security and Spurs Innovation

Better bipartisan approach to energy, climate legislation

Saying the last thing the economy needs now is a tax increase, U.S. Rep. Bob Inglis (R-SC) along with lead co-sponsors Reps. Jeff Flake (R-AZ) and Daniel Lipinski (D-IL) filed the Raise Wages, Cut Carbon Act of 2009 (H.R. 2380) Wednesday as a revenue-neutral approach to energy innovation and environmental stewardship.

The bill is a bipartisan alternative to the cap-and-trade legislation working through the Energy & Commerce Committee.

The bill calls for a reduction in payroll taxes for employers and employees in exchange for an equal amount of revenue from a carbon tax, resulting in a net-zero change in taxes and a “double dividend” in efficiency.

Inglis is hopeful the RWCCA bill will attract bipartisan support with the idea of lowering payroll taxes, creating jobs by allowing markets to work and improving our national security by addressing energy and environmental challenges. The measure has the advantage of providing predictable pricing over time to encourage technological investment.

“Let’s lower taxes on something we want more of—income, labor, industry—and shift the tax to something we want less of—carbon dioxide,” Inglis said. “By doing so, we’d do far more than just clean the air—we’d create jobs and we’d improve the national security of the United States by breaking our addiction to oil.”

The bill starts with revenue-neutrality by reducing payroll taxes and putting more money into the hands of American workers. Social security benefits to seniors would be increased to help pay higher energy costs. The Social Security Trust Fund would not be touched and the tax swap would be handled in the General Fund of the Treasury.

A proposed carbon tax of $15 per ton of CO2 would be applied in 2010, increasing to $100 by 2040, adjusted each year for inflation. The bill includes a clear schedule of rates, allowing businesses to plan accordingly. Fossil fuels would be taxed as they enter the economy, at the mine mouth, the oil refinery and the natural gas pipeline, making it easy to implement and minimizing administrative costs.

Problems with the Waxman bill include: it amounts to a massive tax increase in the midst of a recession; it puts carbon credit trading in the hands of the Wall Street traders (who brought us mortgage-backed securities and the banking crisis); it lacks a WTO border-adjustment, which could hurt U.S. companies compete in a global economy; and it has no Republican support.

The advantages of the Raise Wages, Cut Carbon bill include: it’s not a tax increase—it’s a revenue-neutral tax swap; it fixes the underlying market distortion of unrecognized negative externalities, and thereby unleashes the power of free enterprise to solve the problem of energy security; and it gives American manufacturers a level playing field.