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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.

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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.

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May 13, 2009 - Posted by | carbon tax, energy policy, gas tax, politics

19 Comments

  1. Didn’t we do this once before? It’s deja vu all over again.

    Comment by KingofKaty | May 13, 2009

  2. They just issued the press release today announcing that the bill had been released.By the way, an interesting thing happened on my way back from Hawaii. The pilot announced that we were bringing home the remains of 7 serviceman from Vietnam. They had been classified as MIA for the past 40 years. We all stayed on the plane while they removed the flag-draped containers and had a solemn ceremony outside the plane. I am not sure if it is normal to use a commercial aircraft for this, but I had never experienced anything like that.RR

    Comment by Robert Rapier | May 13, 2009

  3. These two statements seem contradictory:”it lacks a WTO border-adjustment, which could hurt U.S. companies compete in a global economy.””it gives American manufacturers a level playing field.”Please explain.

    Comment by Anonymous | May 13, 2009

  4. Prefer a simple hefty gasoline tax, and cut on income taxes on anybody making less than 100k a year.

    Comment by benny 'reargas' cole | May 13, 2009

  5. I am reading this book on globalization . That has an analysis of why China's products in the US are so much cheaper.Reasoning is given here.http://www.randomhouse.com/catalog/display.pperl?isbn=9780307269331&view=excerptRead from the segment entitledChina Price Advantage

    Comment by takchess | May 13, 2009

  6. I am baffled by the premise here. Countries like China are both lower emitters than the US and more efficient. The US is both a high emitter and less efficient.This sounds more like a “back door” method of protectionism, with a veneer of greenwashing.

    Comment by bc | May 13, 2009

  7. RR – yes, commercial airlines are normally used for this. There was very likely a uniformed member of the armed services there to escort the bodies. I was doing a lot of business in the northeast and would fly non-stop between Philadelphia and Houston. The DOD mortuary facility is in Dover, Delaware. So I’ve been on maybe 5 or 6 commercial flights that carried the bodies of service personnel killed in Iraq or Afghanistan. There is a movie about it with Kevin Bacon: Taking Chance In Houston two fire engines come out and create a water arch that the plane passes through as it nears the terminal. They tell the passengers as they land so that they don’t become distressed when they see fire engines.

    Comment by KingofKaty | May 13, 2009

  8. “There was very likely a uniformed member of the armed services there to escort the bodies.”There was. He was sitting about 5 feet from me. Some people were in a hurry for their flight and tried to exit before the ceremony was over, and this woman on the plane just jumped down their throat. Ugly scene.RR

    Comment by Robert Rapier | May 13, 2009

  9. “Countries like China are both lower emitters than the US and more efficient. The US is both a high emitter and less efficient.”That is exactly opposite of what Rubin’s book claims. I will get into that in a few days when I review it. I am almost finished with it.RR

    Comment by Robert Rapier | May 13, 2009

  10. It’s normal for commercial airlines to offer John Doe service. I don’t know what the military does.

    Comment by robert | May 13, 2009

  11. On all my flights everyone was always dignified and allowed the escort to deplane first. If I had been on your flight I might have dressed down anyone in a hurry to get off. There isn’t anything so important that we can’t take 5 minutes to show some respect for someone who has paid the ultimate sacrifice for our country.

    Comment by KingofKaty | May 13, 2009

  12. “Countries like China are both lower emitters than the US and more efficient. The US is both a high emitter and less efficient.” I was thinking just the opposite. On a per unit of GDP, China does much worse on pollution than the US or EU. They burn crappy, low-btu coal, rather inefficiently, although they are getting better. Their habit of cramming together factories into industrial/residential complexes gives them opportunities for combined heat and power. In the long run they can’t maintain their mercantile economy. Such policies have lead to war or internal upheaval as workers get tired of enriching the state to their own detriment.

    Comment by KingofKaty | May 13, 2009

  13. King-Man, I wonder about free trade, even thought I trained in economics. Living standards have skyrocketed in countries that do not practice free trade, but mercantilsm, those being Japan, China and S. Korea. Meanwhile, wages have sinking in the US since 1972. A regular guy cannot join a factory line anymore in America and make good money. Those countries own us now, through bonds. Okay, maybe the joke will be on them when we default on our bonds, but from what I see, there are benefits to the Asian way.At time I think the USA has become a Banana Republic, while real progress os being made in East Asia.

    Comment by benny "reargas" cole | May 13, 2009

  14. Effect of a tax on “carbon”? Less production of oil, along with less production of coal (US primary indigenous fuel source) and gas (which Benny is counting on to save us all).Who is hurt by this “revenue neutral” tax? Among others, the oil exporters we are all going to depend on for the next few decades.Saudi Arabia has already been reported as saying that the Copenhagen jamboree will have to address equity for current oil exporters. If the West wants to shut them down and impoverish them (which is what this tax would do), then the West has a moral responsibity to give them the funds and the technology to survive in a post-fossil world.Beware the Law of Unintended Consequences!

    Comment by Kinuachdrach | May 13, 2009

  15. The cost of doing business in China is shameful. It is hard to find a county that is more productive, safer, efficient, and cleaner than the US. I will use coal as an example. At a time when the US and China produced equal amounts of coal, the US lost 50 miners while China lost 5000. The coal plant that generates my electricity is 75% more efficient at using the coal. Injuries in US power plants are very low. My air is clean, my water is clean.Think about massive coal equipment, massive corn combines, and one shift supervisor overseeing a a 1200 MWe nuke plant. These incredibly productive Americans work in shirt selves and air conditioning.So some loon in DC think taxing CO2 is a good idea. We should put those who do it best in the world out of work while pretending China, India, and Brazil will stop using coal in a relatively wasteful fashion.The worst example I found in China is fireworks. Working with ammonia nitrate compounds are very dangerous especially if it can get contaminated with oil. I was researching events when I came across multiple events in China. Apparently grade school children make cheap labor judging from the number of schools in China that blow up.

    Comment by Kit P | May 14, 2009

  16. Kit P-Many times I disagree with you, and sometimes I can’t even understand what you say. But your comment about 5000 miners dying in China is spot on.I am reminded of an old movie in which a wealthy kept Mob-woman is told by her former lover, “You see that necklace you are wearing? That was paid for a some hookers in the Bronx, a broken knee in Philly, a few junkies’ families and a bribed cop in Chicago.”I feel like saying to people, “You see that nice goo-gaa you just bought from China? Well, it was bought by some dead miners in China, and their sisters working 12-hour days for $2.”Maybe no one will understand me now, Kit P.

    Comment by benny "reargas" cole | May 14, 2009

  17. Benny – it would be a bit disengenuous for Americans or Brits to bash mercantilism, because we practiced it – for a while. Mercantilism only works as long as there is labor to exploit and a market for you to flood with your cheap goods. Sooner or later you run out of one or both. Or other countries get fed up with the trade imbalance and start implementing their own mercantile policies.

    Comment by KingofKaty | May 14, 2009

  18. King,I think you are spot on about China. I think long term China is destined for upheaval. India is more likely to be succesful in the long term, IMHO.So some loon in DC think taxing CO2 is a good idea. We should put those who do it best in the world out of work while pretending China, India, and Brazil will stop using coal in a relatively wasteful fashion.Argued like a true loser: Let’s sit on our hands until China reduces their CO2 emissions! It’s fun to act like a four-year old, ain’t it?Somebody has to take the lead in reducing CO2, and the US has never shied away from that role. Why start now?There may even be a long term pay-off: reducing CO2 would involve using energy more efficienctly, so there may be some good cost savings to be had. The methods for doing so may also be sold to BRIC countries, potentially for a profit.

    Comment by Optimist | May 15, 2009

  19. “You see that nice goo-gaa you just bought from China? Well, it was bought by some dead miners in China, and their sisters working 12-hour days for $2.”What’s the solution, Ben? Stop buying Chinese, so that the sister can get fired from that job and be forced too look for something even worse?I agree, the status quo is a mess. But how to improve things does not seem so obvious.Of course, it we help if our elected prostitutians had some backbone, and were able to (occasionally) stand up to China, like some US leaders of the distant past did to adversaries.

    Comment by Optimist | May 15, 2009


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