nnuut
Moderator | TSP Legend
OK BIG SPENDERS, what should happen to Cap and Trade? Will it help the environment, reduce pollution, and stimulate the economy or have little or no effect on Climate Change and air pollution, over TAX industry and Tax Payers while dragging the economy farther down into the Recession Hole?
Who Pays for Cap and Trade?
Hint: They were promised a tax cut during the Obama campaign.
Cap and trade is the tax that dare not speak its name, and Democrats are hoping in particular that no one notices who would pay for their climate ambitions. With President Obama depending on vast new carbon revenues in his budget and Congress promising a bill by May, perhaps Americans would like to know the deeply unequal ways that climate costs would be distributed across regions and income groups.
Politicians love cap and trade because they can claim to be taxing "polluters," not workers. Hardly. Once the government creates a scarce new commodity -- in this case the right to emit carbon -- and then mandates that businesses buy it, the costs would inevitably be passed on to all consumers in the form of higher prices. Stating the obvious, Peter Orszag -- now Mr. Obama's budget director -- told Congress last year that "Those price increases are essential to the success of a cap-and-trade program."
Hit hardest would be the "95% of working families" Mr. Obama keeps mentioning, usually omitting that his no-new-taxes pledge comes with the caveat "unless you use energy." Putting a price on carbon is regressive by definition because poor and middle-income households spend more of their paychecks on things like gas to drive to work, groceries or home heating.
The Congressional Budget Office -- Mr. Orszag's former roost -- estimates that the price hikes from a 15% cut in emissions would cost the average household in the bottom-income quintile about 3.3% of its after-tax income every year. That's about $680, not including the costs of reduced employment and output. The three middle quintiles would see their paychecks cut between $880 and $1,500, or 2.9% to 2.7% of income. The rich would pay 1.7%. Cap and trade is the ideal policy for every Beltway analyst who thinks the tax code is too progressive (all five of them).
But the greatest inequities are geographic and would be imposed on the parts of the U.S. that rely most on manufacturing or fossil fuels -- particularly coal, which generates most power in the Midwest, Southern and Plains states. It's no coincidence that the liberals most invested in cap and trade -- Barbara Boxer, Henry Waxman, Ed Markey -- come from California or the Northeast.
Coal provides more than half of U.S. electricity, and 25 states get more than 50% of their electricity from conventional coal-fired generation. In Ohio, it totals 86%, according to the Energy Information Administration. Ratepayers in Indiana (94%), Missouri (85%), New Mexico (80%), Pennsylvania (56%), West Virginia (98%) and Wyoming (95%) are going to get soaked.
Another way to think about it is in terms of per capita greenhouse-gas emissions. California is the No. 2 carbon emitter in the country but also has a large economy and population. So the average Californian only had a carbon footprint of about 12 tons of CO2-equivalent in 2005, according to the World Resource Institute's Climate Analysis Indicators, which integrates all government data. The situation is very different in Wyoming and North Dakota -- paging Senators Mike Enzi and Kent Conrad -- where every person was responsible for 154 and 95 tons, respectively. See the nearby chart for cap and trade's biggest state winners and losers.
Democrats say they'll allow some of this ocean of new cap-and-trade revenue to trickle back down to the public. In his budget, Mr. Obama wants to recycle $525 billion through the "making work pay" tax credit that goes to many people who don't pay income taxes. But $400 for individuals and $800 for families still doesn't offset carbon's income raid, especially in states with higher carbon use.
All the more so because the Administration is lowballing its cap-and-trade tax estimates. Its stated goal is to reduce emissions 14% below 2005 levels by 2020, which assuming that four-fifths of emissions are covered (excluding agriculture, for instance), works out to about $13 or $14 per ton of CO2. When CBO scored a similar bill last year, it expected prices to start at $23 and rise to $44 by 2018. CBO also projected the total value of the allowances at $902 billion over the first decade, which is some $256 billion more than the Administration's estimate. [more]
http://online.wsj.com/article/SB123655590609066021.html
Who Pays for Cap and Trade?
Hint: They were promised a tax cut during the Obama campaign.
Cap and trade is the tax that dare not speak its name, and Democrats are hoping in particular that no one notices who would pay for their climate ambitions. With President Obama depending on vast new carbon revenues in his budget and Congress promising a bill by May, perhaps Americans would like to know the deeply unequal ways that climate costs would be distributed across regions and income groups.
Politicians love cap and trade because they can claim to be taxing "polluters," not workers. Hardly. Once the government creates a scarce new commodity -- in this case the right to emit carbon -- and then mandates that businesses buy it, the costs would inevitably be passed on to all consumers in the form of higher prices. Stating the obvious, Peter Orszag -- now Mr. Obama's budget director -- told Congress last year that "Those price increases are essential to the success of a cap-and-trade program."
Hit hardest would be the "95% of working families" Mr. Obama keeps mentioning, usually omitting that his no-new-taxes pledge comes with the caveat "unless you use energy." Putting a price on carbon is regressive by definition because poor and middle-income households spend more of their paychecks on things like gas to drive to work, groceries or home heating.
The Congressional Budget Office -- Mr. Orszag's former roost -- estimates that the price hikes from a 15% cut in emissions would cost the average household in the bottom-income quintile about 3.3% of its after-tax income every year. That's about $680, not including the costs of reduced employment and output. The three middle quintiles would see their paychecks cut between $880 and $1,500, or 2.9% to 2.7% of income. The rich would pay 1.7%. Cap and trade is the ideal policy for every Beltway analyst who thinks the tax code is too progressive (all five of them).
But the greatest inequities are geographic and would be imposed on the parts of the U.S. that rely most on manufacturing or fossil fuels -- particularly coal, which generates most power in the Midwest, Southern and Plains states. It's no coincidence that the liberals most invested in cap and trade -- Barbara Boxer, Henry Waxman, Ed Markey -- come from California or the Northeast.
Coal provides more than half of U.S. electricity, and 25 states get more than 50% of their electricity from conventional coal-fired generation. In Ohio, it totals 86%, according to the Energy Information Administration. Ratepayers in Indiana (94%), Missouri (85%), New Mexico (80%), Pennsylvania (56%), West Virginia (98%) and Wyoming (95%) are going to get soaked.
Another way to think about it is in terms of per capita greenhouse-gas emissions. California is the No. 2 carbon emitter in the country but also has a large economy and population. So the average Californian only had a carbon footprint of about 12 tons of CO2-equivalent in 2005, according to the World Resource Institute's Climate Analysis Indicators, which integrates all government data. The situation is very different in Wyoming and North Dakota -- paging Senators Mike Enzi and Kent Conrad -- where every person was responsible for 154 and 95 tons, respectively. See the nearby chart for cap and trade's biggest state winners and losers.
Democrats say they'll allow some of this ocean of new cap-and-trade revenue to trickle back down to the public. In his budget, Mr. Obama wants to recycle $525 billion through the "making work pay" tax credit that goes to many people who don't pay income taxes. But $400 for individuals and $800 for families still doesn't offset carbon's income raid, especially in states with higher carbon use.
All the more so because the Administration is lowballing its cap-and-trade tax estimates. Its stated goal is to reduce emissions 14% below 2005 levels by 2020, which assuming that four-fifths of emissions are covered (excluding agriculture, for instance), works out to about $13 or $14 per ton of CO2. When CBO scored a similar bill last year, it expected prices to start at $23 and rise to $44 by 2018. CBO also projected the total value of the allowances at $902 billion over the first decade, which is some $256 billion more than the Administration's estimate. [more]
http://online.wsj.com/article/SB123655590609066021.html
