Creeping Toward a Carbon Tax?

Is a gasoline tax a carbon tax? Not quite, but more and more conservatives have been cracking the door to at least some kind of levy on fossil fuel usage.
There is, at least, a recognition that current gasoline taxes in the US have not kept up with the need for maintaining highway infrastructure. That much is undeniable.   Some are trying to thread the needle of raising a revenue without using the “T” word.

Reality check: In the absence of a formalized carbon tax, we will see more defacto “carbon taxes” in actions like popular resistance to the Keystone pipeline, and the new regulations on coal burning from the EPA.

NYTimes:

Gasoline prices have fallen more than 40 percent since the end of June thanks to the collapse of global oil prices. That makes this the perfect time for Congress to overcome its longstanding terror of offending the nation’s motorists and raise the tax on gasoline and diesel fuel. The results could only be beneficial: for the nation’s roads, bridges and transit systems, which badly need repair; for the budget; and, to the extent that higher taxes encourage greater fuel efficiency, for the climate.

The federal excise tax of 18.4 cents per gallon on gas and 24.4 cents on diesel has not been increased since 1993. That has severely shortchanged the Highway Trust Fund, which is expected to run out of money in May if Congress does not transfer more into it or raise fuel taxes. If the federal tax on gasoline had simply kept up with inflation, it would be 30 cents today.

There is little doubt that the nation’s road and transit systems could use more help. The American Society of Civil Engineers gave them a nearly failing grade of D in 2013; the state of bridges is somewhat better, earning a C-plus. The country’s inadequate road and transit systems cost it billions through increased delays, extra fuel costs and auto repair bills. Poor road conditions are also said to play a significant factor in about one-third of all traffic fatalities, or about 10,000 deaths a year.

Some lawmakers, including some Republicans, are concerned enough about these trends to discuss an increase in fuel taxes. Senator Bob Corker, Republican of Tennessee, has proposed increasing the tax, and Senator James Inhofe, Republican of Oklahoma and a big supporter of the energy industry, has said he is willing to consider it. Some state leaders are also considering raising their own fuel taxes. Lawmakers in Michigan have put a gas tax increase on the ballot for a May election, and Iowa lawmakers are also talking about a higher tax.

Irwin Stelzer in the National Review, December 2014:

We have a unique opportunity to end the rancorous debate about climate change, a debate that is poisoning the air — the political air, that is — and inhibiting progress on two fronts: progress on addressing the possibility that we are on the road to a catastrophic warming of the globe, and progress on reforming our anti-growth tax structure, which is so inequitable that it is straining the public’s belief in the fairness of capitalism and what we like to call “the American Dream.” All we need do is stop pretending that the cost of carbon emissions is certainly zero, and that regulation provides a more efficient solution than the market.

It would be simple to build a coalition in support of this move. Start with the president. He believes so strongly that the globe is warming and that disaster awaits that he calls the science “settled.” When anyone disagrees with him, he does what he always does when challenged — attacks them as self-interested defenders of some private interest or other. He long ago proposed a carbon tax, and was turned down by Congress. He recently repeated his preference for such a tax — reflecting, perhaps, his understanding that any edict he issues at next December’s climate summit in Paris will likely not survive his return to private life. A congressionally approved tax, on the other hand, would become part of the legacy he is so eager to create. So Obama’s signature can be counted on.

Conservatives, on the other hand, have always had two objections to pricing carbon. The first is that, like any tax, it would provide funds for a further increase of government spending. But this need not be the case. We can make a carbon tax revenue-neutral by providing a simultaneous reduction in payroll taxes, accomplishing two conservative goals: lowering taxes on work and risk-taking while raising them on consumption.

The second conservative fear has always been that a carbon tax would impede growth, rendering the U.S. uncompetitive in world markets as China went merrily along emitting CO2. The weight of the evidence now suggests that such a fear, while not completely unwarranted, should not be allowed to outweigh the efficiency gains to our economy from substituting a market-oriented tax for far blunter regulation, and from setting the stage for ending subsidies to wind, sun, and other uneconomic schemes.

Stelzer adds a mandatory comforting note for his science-phobic audience:

Note that support for a carbon tax does not require signing on to the new religion of global climate change, which supports government intervention in the economy even if (when) the theoretical models yield to recent reality and start to project a new ice age. Such conservative support would depend solely on a desire to get the economy growing faster by shifting the tax burden from good stuff like work to bad stuff like pollutants.

Roll Call:

Senate Environment and Public Works Chairman James M. Inhofe said Wednesday that the GOP continues to look at a gas tax increase among other alternatives to cover shortfalls in transportation spending, characterizing the mechanism as a “user fee.”

The Oklahoma Republican also said he’s confident he will succeed in negotiating a long-term transportation authorization bill with Democrats while at the same time doing everything he can to thwart the Obama administration’s environmental agenda.

Inhofe’s comments came even as lawmakers struggle to identify viable options for shoring up the Highway Trust Fund and as the administration stands firm against opposition to EPA regulations.

At a roundtable discussion with reporters, Inhofe echoed comments made in recent days by other Senate Republicans that no options for offsetting the cost of a five- or six-year highway bill should be taken off the table. That includes an increase in the 18.4-cents-per-gallon federal gasoline tax.

Inhofe prefers to call it a “user fee,” although he also called it “the most fair tax you can have” because only drivers who need gas would have to cover that cost.

Conservative Columnist Charles Krauthammer:

As a result, some in Congress are talking about a 10- or 20-cent hike in the federal tax to use for infrastructure spending. Right idea, wrong policy. The hike should not be 10 cents but $1. And the proceeds should not be spent by, or even entrusted to, the government. They should be immediately and entirely returned to the consumer by means of a cut in the Social Security tax.

The average American buys about 12 gallons of gas a week. Washington would be soaking him for $12 in extra taxes. Washington should therefore simultaneously reduce everyone’s Social Security, or FICA, tax by $12 a week. Thus the average driver is left harmless. He receives a $12 per week FICA bonus that he can spend on gasoline if he wants — or anything else. If he chooses to drive less, it puts money in his pocket. (The unemployed would have the $12 added to their unemployment insurance; the elderly, added to their Social Security check.)

The point of the $1 gas tax increase is not to feed the maw of a government raking in $3 trillion a year. The point is exclusively to alter incentives — to reduce the disincentive for work (the Social Security tax) and to increase the disincentive to consume gasoline.
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A tax is the best way to improve fuel efficiency. Today we do it through rigid regulations, the so-called CAFE standards imposed on carmakers. They are forced to manufacture acres of unsellable cars in order to meet an arbitrary, bureaucratic “fleet” gas-consumption average.

This is nuts. If you simply set a higher price point for gasoline, buyers will do the sorting on their own, choosing fuel efficiency just as they do when the world price is high. The beauty of the tax — as a substitute for a high world price — is that the incentive for fuel efficiency remains, but the extra money collected at the pump goes right back into the U.S. economy (and to the citizenry through the revenue-neutral FICA rebate) instead of being shipped overseas to Russia, Venezuela, Iran and other unsavories.

Which is a geopolitical coup. Cheap oil is the most effective and efficient instrument known to man for weakening these oil-dependent miscreants.

And finally, lower consumption reduces pollution and greenhouse gases. The reduction of traditional pollutants, though relatively minor, is an undeniable gain. And even for global warming skeptics, there’s no reason not to welcome a benign measure that induces prudential reductions in carbon dioxide emissions.