Ten Miles Square


September 14, 2012 10:57 AM Is This the Tax to Pass the Grover Norquist Test?

By Ezra Klein

I’ll admit it. Sometimes, when this election gets too small or depressing, I fantasize about the fiscal cliff.

What, you don’t fantasize about the fiscal cliff?

I imagine that somewhere on Capitol Hill, Republican leaders are devising a plan to keep taxes from rising if President Barack Obama is re-elected. In order to raise taxes, Obama only needs to … do nothing. If Congress can’t produce a deal that the president is willing to sign, the Bush tax cuts will expire automatically on Jan. 1 along with Obama’s payroll-tax cuts. Taxes will rise by trillions of dollars over the next decade.

In my dream, Republican leaders huddle in a room trying to determine what they can offer Democrats to avoid that nightmare. At some late hour, either shortly before or shortly after the nation has plunged over the fiscal cliff, when both parties are exhausted from fruitless negotiations, Senate Minority Leader Mitch McConnell — even if Republicans win the Senate, which I think they are likely to do, McConnell won’t become majority leader until the 113th Congress is sworn in — makes a move. He takes his old colleague Joe Biden aside and proposes the following: Cut your revenue demand in half and, as part of a comprehensive tax reform, Republicans will agree to a $20-per-ton tax on carbon emissions.

Annoying Environmentalists

McConnell would have to convince Republicans that it’s
better to stop tax increases than to continue annoying
environmentalists and Al Gore. But, in theory at least,
this shouldn’t be a terribly difficult policy argument for
Republicans to endorse.

Let’s say you believe there is a 20 percent chance
that global warming is anything other than a hoax. In that
case, you are indifferent to carbon, with only a slight
concern that the stuff might be catastrophic. But you are
not indifferent to work and income, which everyone wants
more of. So given a choice between taxing work and income
on one hand, or taxing carbon on the other, the preference
is clear: Tax carbon, especially as part of a deal to lower
overall tax rates.

Some conservative groups and economists have already
made this argument. Martin Feldstein, who was the top
economist in Ronald Reagan’s administration, proposed a
carbon tax in the Wall Street Journal back in 1992. When
the American Enterprise Institute, a conservative think
tank, had to submit a deficit-reduction plan as part of the
Peter G. Peterson Foundation’s 2011 Fiscal Summit Solutions
Initiative, the four scholars in charge of the project
included a $26-per-ton carbon tax in order “to address
environmental concerns in a more market‚Äźfriendly manner.”
Gregory Mankiw, a Harvard economist who advises Mitt Romney’s campaign team, has written that there is “broad
consensus” among wonks for a global carbon tax.

Bob Inglis, a South Carolina Republican who lost a
2010 primary challenge, is crisscrossing the country trying
to build support for the idea. “From a conservative
perspective,” he told me, “this is a fabulous opportunity
to reduce taxes on something you want more of, which is
income, and to put a tax on something you want less of,
which is harmful emissions.”

Long-Term Threat

Would Democrats agree to such a deal? I think they
would. Democrats want more federal revenue, but not with
the same ferocity with which Republicans want lower taxes.
And most Democratic policy wonks — even those who don’t
focus on energy issues — believe that climate change is
the nation’s greatest long-term threat, outstripping
health-care costs or budget deficits.

A particular problem for Democrats would be the
regressive nature of a carbon tax. The poor, who spend a
larger share of income on home heating and gasoline, would
be hit especially hard. The Brookings Institution’s
Hamilton Project has proposed a carbon tax of $20-per-ton
of carbon dioxide that would rebate 45 percent of revenue
to low-income taxpayers. This makes the tax progressive
while still generating sufficient revenue — about $550
billion over 10 years — to enable continuation of the
income-tax cuts. And if Congress still needs spending
reductions to replace forgone tax revenue, the American
Enterprise Institute’s plan proposed one obvious set of
cuts: the various tax credits and subsidies for both clean
and dirty oil production.

So that’s the dream. I called Grover Norquist — lord
of the anti-tax pledge — to run my fantasy scenario by the
Republican Party’s chief anti-tax enforcer. “If one cut the
income tax dollar for dollar and had a carbon tax in its
place, it would not be a violation of the taxpayer
protection pledge,” he said. “But you’re creating a new tax
that will grow,” he continued. “A Republican Party which
creates a new tax would not be long for the world.“

That’s why it is just a dream.

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Ezra Klein is a columnist for Bloomberg View.
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  • matt w on September 15, 2012 8:55 AM:

    "better to stop tax increases than to continue annoying environmentalists and Al Gore. But, in theory at least, this shouldnít be a terribly difficult policy argument for Republicans to endorse."

    I think this is where the argument falls down, even before you get to Norquist. Annoying liberals and environmentalists is the fundamental principle of modern Republicanism -- remember the great War on Light Bulbs? And there's this great anecdote, from a commenter at the Reality-Based Community:

    Some friends of our live in Bachmanís district. When they moved, there was a meet-the-neighbors party, and one couple commented, ďPolitcially, weíre pretty conservative. We donít recycle.Ē

    So this whole post seems to be based on the idea that the Republicans would identify two problems that are near and dear to the hearts of liberals (we need to raise taxes to fund the government, we need to do something about global warming) and try to do something about it, if not for Norquist's anti-tax pledge. The Republican Party we have is nothing like this. Norquist isn't the only problem.

  • Art Hackett on September 15, 2012 9:10 AM:

    Wouldn't this face the same problem as the gasoline tax used to finance highways? As fuel economy increases and driving decreases, revenues drop making it impossible to maintain highways? On the other hand it would turn fiscal conservatives into energy conservatives. Michele Bachman would be selling LED bulbs door to door to starve the government! SUVs would disappear from suburban country clubs, replaced by fleets of Priii!

  • jhm on September 16, 2012 7:57 AM:

    I'm not sure what purpose is served by quoting decade old conservative opinions; these positions were never intended to survive the possibility of their ever being enacted.

  • zandru on September 16, 2012 10:35 PM:

    Art Hackett suggests that a carbon tax would be counterproductive, because it would discourage carbon emissions.

    Well, you betcha! That's the whole point. The fact that it also yields REVENUE is icing on the cake: reducing carbon is the whole point.

    Remember cigarettes? The whopping big tax on them is mainly geared to reduce consumption, particularly among kids. Sure, the taxes collected fund something. But reducing smoking is the actual benefit.

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