In state houses across the country, lawmakers are pushing to implement taxes on carbon-dioxide emissions, a move they say is necessary to slow global warming. Carbon taxes impose levies based on the amount of carbon dioxide emitted from fossil fuels. Although the proposed tax schemes vary from state to state, most proposals now under consideration would establish a tax of about $10 to $15 per ton of carbon dioxide emitted in the first year and then increase the tax every year until a specified cap is reached.
For instance, a carbon tax proposal in Hawaii would begin at $10 per ton in 2019 and increase by $5 per ton each subsequent year until the tax reaches $40 per ton in 2025. A recently proposed carbon tax plan in Connecticut would start at $15 per ton in 2020 and increase by $5 per ton every year indefinitely.
{mosads}Other carbon tax schemes have been offered this year in Maryland, Massachusetts, New York, Rhode Island, Utah, Vermont, and Washington State.
In many of these proposals, lawmakers plan to use the revenues generated by the carbon tax to provide “rebates” or “dividends” to businesses and residents. In Connecticut’s plan, 45 percent of the revenue would be given to employers, 50 percent would go directly to residents, and the remaining 5 percent would be kept by the state to pay administrative costs. In a carbon tax proposal in New York, 60 percent of the collected revenues would be rebated to “very low to moderate income” New Yorkers.
These rebates are used to convince the public carbon taxes are good for everyone, because tax proponents allege only the biggest carbon-dioxide emitters end up paying the tax, and increased costs and prices are offset by dividends given by the state. However, this is pure fantasy. The rebates won’t ever fully counterbalance the price increases that are sure to come when businesses and energy suppliers are forced to pay millions of dollars in taxes, especially since governments often keep some, or even all, of the revenues for themselves. These plans also never take into account the large number of businesses that will move to more business-friendly states to avoid these burdensome taxing schemes — taking jobs, innovation, and employees with them.
Carbon tax policies are particularly harmful for lower-income and working-class families, who spend a greater proportion of their money on the products that would be affected the most by a carbon tax, such as transportation, electricity, and heat. The nonpartisan Congressional Budget Office found that a national $28 carbon tax would increase energy costs by 250 percent for the poorest one-fifth of households compared to the wealthiest one-fifth.
Because carbon taxes would incentivize businesses to slow or stop development or move to other states or countries, they would stunt economic growth and could even result in less tax revenues. A 2013 study published by the National Association of Manufacturers, conducted by NERA Economic Consulting, estimates a national $20-per-ton carbon tax that increases by 4 percent annually would cost more than $140 billion in lost tax revenues resulting from reduced economic activity by the middle of the twenty-first century.
The NAM study also projected the carbon tax would greatly increase the cost of energy. For instance, gas prices would increase by 20 cents per gallon in the tax’s first year and would be more than 90 cents higher than the researcher’s baseline projection by the 2050s. That means working families could end up spending hundreds or even thousands of additional dollars every year for motor fuel.
In 2017, the Conference Board of Canada found a nationwide carbon tax in Canada would reduce the country’s GDP by as much as $3 billion after just one year.
The justification used to support carbon taxes is that it’s necessary to help stop global warming, which some lawmakers seem convinced is entirely the result of humans’ carbon-dioxide emissions. Many scientists disagree about the causes and consequences of climate change, but even if it’s assumed global warming is the result of CO2 emissions, carbon taxes in the United States would have absolutely no effect on global warming, because while some states might choose to curb emissions, other developing nations and semi-industrialized states, including China and India, will continue expanding their fossil-fuel-powered industries at rates that far surpass what few reductions would be made in America.
Former Secretary of State of John Kerry acknowledged this problem in a December 2015 speech to the U.N. Framework Convention on Climate Change: “The fact is that even if every American citizen biked to work, carpooled to school, used only solar panels to power their homes, if we each planted a dozen trees, if we somehow eliminated all of our domestic greenhouse gas emissions, guess what — that still wouldn’t be enough to offset the carbon pollution coming from the rest of the world.”
That means the economic pain and suffering created by carbon taxes would benefit absolutely no one — except, of course, the renewable power special interest groups that have cozied up to lawmakers to pressure them to impose carbon taxes and other mandates that benefit their businesses.
Justin Haskins is executive editor and a research fellow at The Heartland Institute. Timothy Benson is a policy analyst at The Heartland Institute.