The Carbon Tax Rebate Scam

A group of old-guard, “swamp” Republicans calling themselves the Climate Leadership Council (CLC) has joined climate alarmists, including failed Democratic Party presidential candidate Al Gore, in calling for a tax on carbon-dioxide emissions. The group claims increasing CO2 emissions pose a threat for Earth’s people, animals, and plants.

Economic analyses of various carbon-tax proposals consistently show they would harm all Americans and would be detrimental for the U.S. economy. A carbon tax would burden businesses with unnecessary costs, making them less competitive in the global marketplace. All this, and much more, is why Congress passed a resolution in 2016 rejecting carbon taxes.

A standalone tax on carbon-dioxide emissions would have a disparate impact on the poorest Americans, because they spend a greater portion of their incomes on energy and energy-intensive products compared to upper-middle-class and relatively wealthy Americans. CLC recognizes this, so to avoid punishing the poor, carbon-tax proponents promise to rebate the revenue generated by the tax back to the public.

CLC’s plan would begin with a carbon tax rate of $40 per ton. At that rate, CLC says a family of four would receive approximately $2,000 as part of its carbon refund in the program’s first year. CLC brags the bottom 70 percent of Americans under its plan would receive more in refunds than they would pay in increased energy costs.

That’s great -- unless you are one of the people that fall in the 30 percent that would pay more for energy without getting a full rebate. Since the rebate is aimed at eliminating the tax’s regressive impact on the poor, we can only assume the poor would get a greater proportion of the total rebate funds while the middle class and relatively wealthy would pay more than their fair share.

CLC is extremely pleased with this soak-the-rich, subsidize-the-poor scheme, but since when did Republicans become the party of class warfare?

Among the many problems with CLC’s plan is that it appears to assume it will be virtually cost-free to run the program. Nothing could be further from the truth. How are we to calculate or track the amount people would pay in new energy taxes to qualify for their rebate? Will everyone have to receive a national carbon-tax ID card, or will they have to use their Social Security card when they purchase gasoline or pay their electric bill? Whichever method the CLC chooses, the government needs a way to determine who gets which rebate, and that will likely (and rightfully so) raise the hackles of people who oppose the creation of a national ID.

Perhaps Americans will be required to itemize the carbon taxes they pay, meaning taxpayers will have to keep track of even more tiny receipts to properly file their tax returns. How much time and effort will this add to filing one’s taxes, and how much more will taxpayers pay in an attempt to ensure their taxes are filed correctly? And these questions don’t even address the additional audits some taxpayers will have to endure. What a nightmare!

A carbon tax would also result in higher policing costs, because the criminal-justice system would have to deal with tax-cheats and the efforts of organized criminal groups seeking to steal money by creating false carbon-tax IDs for illegal aliens and others. Some criminals would surely attempt to sell untaxed, black-market gasoline and other fuel.

Just like with every other government program, there will be huge costs associated with collecting, tracking, auditing, and archiving the taxes paid and rebates paid out. New employees will have to be hired. Unless a whole new government bureaucracy is created, existing federal workers will have to divert their time from other responsibilities to focus on the carbon-tax program.

These and other costs will amount to billions of dollars lost each year, unless these costs are paid directly out of the revenues the tax generates, in which case all the taxes charged will not be paid out in rebates. This means the tax would not be revenue-neutral and taxpayers would have to make up the costs of the program.

To prevent businesses from fleeing the country to escape all these taxes and costs, CLC proposes imposing a border adjustment for the carbon content of imports and exports. Exporters sending goods to countries without comparable carbon-pricing systems would receive rebates for carbon taxes paid, while those importing from these countries would face fees on the carbon content of their products.

It’s also important to note CLC’s proposed “border carbon adjustment” will likely not hold up when challenged under various international trade agreements the United States is already a party to, including the World Trade Organization. Even if a border carbon adjustment is ultimately allowed -- after spending millions of dollars fighting on the program’s behalf in international tribunals -- other countries would likely respond with their own protectionist policies, adding even more costs for consumers.

There is no good time to enact bad policy, and carbon taxes are undoubtedly that. Republicans shouldn’t let the nebulous specter of climate change transform it into the party of protectionism, larger government, higher taxes, and less freedom. Democrats already have that covered!

H. Sterling Burnett, Ph.D. (hburnett@heartland.org) is a research fellow on energy and the environment at The Heartland Institute, a nonpartisan, nonprofit research center headquartered in Arlington Heights, Illinois.

A group of old-guard, “swamp” Republicans calling themselves the Climate Leadership Council (CLC) has joined climate alarmists, including failed Democratic Party presidential candidate Al Gore, in calling for a tax on carbon-dioxide emissions. The group claims increasing CO2 emissions pose a threat for Earth’s people, animals, and plants.

Economic analyses of various carbon-tax proposals consistently show they would harm all Americans and would be detrimental for the U.S. economy. A carbon tax would burden businesses with unnecessary costs, making them less competitive in the global marketplace. All this, and much more, is why Congress passed a resolution in 2016 rejecting carbon taxes.

A standalone tax on carbon-dioxide emissions would have a disparate impact on the poorest Americans, because they spend a greater portion of their incomes on energy and energy-intensive products compared to upper-middle-class and relatively wealthy Americans. CLC recognizes this, so to avoid punishing the poor, carbon-tax proponents promise to rebate the revenue generated by the tax back to the public.

CLC’s plan would begin with a carbon tax rate of $40 per ton. At that rate, CLC says a family of four would receive approximately $2,000 as part of its carbon refund in the program’s first year. CLC brags the bottom 70 percent of Americans under its plan would receive more in refunds than they would pay in increased energy costs.

That’s great -- unless you are one of the people that fall in the 30 percent that would pay more for energy without getting a full rebate. Since the rebate is aimed at eliminating the tax’s regressive impact on the poor, we can only assume the poor would get a greater proportion of the total rebate funds while the middle class and relatively wealthy would pay more than their fair share.

CLC is extremely pleased with this soak-the-rich, subsidize-the-poor scheme, but since when did Republicans become the party of class warfare?

Among the many problems with CLC’s plan is that it appears to assume it will be virtually cost-free to run the program. Nothing could be further from the truth. How are we to calculate or track the amount people would pay in new energy taxes to qualify for their rebate? Will everyone have to receive a national carbon-tax ID card, or will they have to use their Social Security card when they purchase gasoline or pay their electric bill? Whichever method the CLC chooses, the government needs a way to determine who gets which rebate, and that will likely (and rightfully so) raise the hackles of people who oppose the creation of a national ID.

Perhaps Americans will be required to itemize the carbon taxes they pay, meaning taxpayers will have to keep track of even more tiny receipts to properly file their tax returns. How much time and effort will this add to filing one’s taxes, and how much more will taxpayers pay in an attempt to ensure their taxes are filed correctly? And these questions don’t even address the additional audits some taxpayers will have to endure. What a nightmare!

A carbon tax would also result in higher policing costs, because the criminal-justice system would have to deal with tax-cheats and the efforts of organized criminal groups seeking to steal money by creating false carbon-tax IDs for illegal aliens and others. Some criminals would surely attempt to sell untaxed, black-market gasoline and other fuel.

Just like with every other government program, there will be huge costs associated with collecting, tracking, auditing, and archiving the taxes paid and rebates paid out. New employees will have to be hired. Unless a whole new government bureaucracy is created, existing federal workers will have to divert their time from other responsibilities to focus on the carbon-tax program.

These and other costs will amount to billions of dollars lost each year, unless these costs are paid directly out of the revenues the tax generates, in which case all the taxes charged will not be paid out in rebates. This means the tax would not be revenue-neutral and taxpayers would have to make up the costs of the program.

To prevent businesses from fleeing the country to escape all these taxes and costs, CLC proposes imposing a border adjustment for the carbon content of imports and exports. Exporters sending goods to countries without comparable carbon-pricing systems would receive rebates for carbon taxes paid, while those importing from these countries would face fees on the carbon content of their products.

It’s also important to note CLC’s proposed “border carbon adjustment” will likely not hold up when challenged under various international trade agreements the United States is already a party to, including the World Trade Organization. Even if a border carbon adjustment is ultimately allowed -- after spending millions of dollars fighting on the program’s behalf in international tribunals -- other countries would likely respond with their own protectionist policies, adding even more costs for consumers.

There is no good time to enact bad policy, and carbon taxes are undoubtedly that. Republicans shouldn’t let the nebulous specter of climate change transform it into the party of protectionism, larger government, higher taxes, and less freedom. Democrats already have that covered!

H. Sterling Burnett, Ph.D. (hburnett@heartland.org) is a research fellow on energy and the environment at The Heartland Institute, a nonpartisan, nonprofit research center headquartered in Arlington Heights, Illinois.

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