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Clean Power carbontax

Published on July 5th, 2012 | by Scott Raybin


Lower Taxes + Lower Carbon Emissions = Possibility?

A carbon emission tax (or a similar cap & trade program) has been instituted in many European nations, Australia, and Canada. In Washington, mentioning the word “TAX” and “CARBON”, is anathema and political suicide.

But let’s try to look at the glass half full. What if we could reduce carbon emissions and the corporate income tax rate simultaneously? Huh? That is as strange a pairing as Rush Limbaugh and Rachel Maddow partying together for a weekend in Cabo.

Well, in British Columbia, it is happening. And not only is it happening, but last Sunday the government actually raised the tax from $25 to $30 per metric ton of carbon dioxide, making it more expensive to pollute. With this revenue, the corporate tax rate has just been lowered from 12% to 10%.

Here is how it works:

By replacing a carbon tax for taxes on payroll, on businesses, or on workers is a no brainer — that’s what this does. Additionally, carbon taxes reduce carbon emissions. So, in this scenario, both sides of numerous political “debates” get something. The progressives get a reduction of something harmful to the environment, and the conservatives get a reduction in corporate and personal tax rates. This carbon tax swap can reduce the economic drag created by our current tax system and increase long-run growth by nudging the economy away from consumption and borrowing and toward saving and investment.

It sounds too good to be true, so lets look at the numbers in more detail:

If the US were to apply the same $30 carbon tax, it would generate approximately $145 billion a year. With this revenue, corporate and personal income taxes could be reduced to 10%, costing a total of about $100 billion, with $45 billion left over. This $45 billion could be used to pay down debt or fund causes for either political party.

Of course, a carbon tax would decline over time, as the country reduces carbon emissions, but this could take decades and, in the mean time, it could pay for big reductions in existing taxes. Furthermore, it could instigate energy conservation and facilitate investment into clean fuel technology.

In order for this idea to come to fruition, we need political courage and a paradigm shift in the corporate sector from “profits” to “responsibility.”

Finally, the carbon tax would provide Americans more control of their tax destiny. By creating a revenue-neutral (or even revenue-positive) tax swap, it is an opportunity to reduce existing taxes and clean up the environment. It would increase personal freedom and energy security at the same time.

Scott Raybin @greensavingsco

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  • Hats

    Sorry to nit pick but shouldn’t the start read “In Washington, mentioning the word “TAX” and “CARBON”, is tantamount to political suicide.” or something like “… is anathema and political suicide.”?
    The way you’ve used anathema doesn’t seem to make sense. If I’m wrong about this though (these could just be Australian-isms) could you please explain why? it’s the only what I’ll learn.

    • Zachary Shahan

      hmm, thanks for the catch. going to go ahead and change this to the latter

  • Goaway

    Carbon tax is however very regressive, since the poor consume/burn all of their income, while the rich only consume a part of it, while saving/investing the rest.

    So we are really over taxing the poor, and reducing corporate/high income tax. Its a shame, but true.


    • Ronald Brak

      Look at the carbon tax Australia introduced this month for an example of a carbon tax that is revenue neutral and progressive.  The rates of tax on low and median incomes were reduced while pensions and unemployment benefits were increased.

  • anderlan

    I can only hope and pray this idea catches on.  Although, it would make more sense to move the money directly (equal per capita (less for minors) monthly checks to households) without calling it a tax cut, because it’s important that government doesn’t depend on damaging behavior for revenue.  Sin taxes should not go into the general fund, but be entirely redistributed or earmarked for certain uses. But I’m not complaining! Whatever it takes to get a net zero rising fossil carbon price passed into law is welcome!  To obviate the problem, any bill doing this should force the tax decreases to lapse once the carbon fund lapses. But that wouldn’t be for a while.  For as long as possible, the fossil carbon price should just keep going up and up to keep the carbon fund at a high, constant level.

    There’s hope. Some on the right side of the pundit gallery already see the value in this type of approach. Charles Krauthammer espoused a net-zero gas tax in 2009: “The beauty of the gas [or fossil] tax is that we–and not OPEC–do the adjusting. And that increase in price doesn’t go into the pocket of various foreign thugs and unfriendlies, but back into the pocket of the American consumer.”

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