Nation's First Carbon Tax Could Be Enacted In Massachusetts

By Patrick Gleadon | July 18, 2019 

Democrats are talking about whether to hold a presidential primary debate focused on climate change alone. The DNC won’t commit to such a forum, but Gizmodo and New Republic recently announced the two media outlets will host a climate-centric debate in New York City. However it's questionable whether that event will be able to get candidates to show up on account of the homophobic op-ed recently published and then retracted by the New Republic, which was subsequently dropped as a debate-cohost.

Whenever climate change or the Green New Deal does come up in one of the more than a dozen Democrat primary debates scheduled for the months ahead, one of the moderators should ask the candidates to explain why they think the nation wants new taxes and regulations aimed at addressing climate change when even blue states where Democrats have sweeping control of state government are refusing to implement similar proposals at the state level. 

A prominent example of how the green agenda has failed in even the bluest of states is the national carbon tax that Democratic politicians, progressive activists, and one Republican member of Congress are calling for. Carbon tax proponents criticize conservatives for opposing this regressive new levy, though not one of the more than a dozen states where carbon tax legislation has been introduced has enacted it. The states rejecting carbon tax legislation include those where Democrats have large legislative majorities and control of the executive branch. 

Most state legislatures have adjourned for the year, but Massachusetts is one of the few states where legislators are still at work, trying to finalize a budget more than three weeks after it was due. Massachusetts also happens to be the place where taxpayers face the most immediate threat of being hit with a carbon tax. 

Legislation (H.2810) introduced by Massachusetts Representative Jennifer E. Benson (D-Lunenburg) would impose a carbon tax of $20 per ton of carbon dioxide equivalent in the first year, increasing by $5 each year until the tax hits $40 per ton. A new study commissioned by the Massachusetts Fiscal Alliance Foundation and conducted by the Beacon Hill Institute (BHI) finds that the average Massachusetts household would be hit with a tax hike of $755 in 2022 if Rep. Benson’s bill were to be enacted. By the fifth year, 2026, that annual tax hike would rise to $1,263 per household.

The report also finds that imposition of a carbon tax would cause Massachusetts to lose 11,090 private sector jobs in 2022, rising to 18,240 lost private sector jobs by 2026. In addition to killing jobs, the report finds that a state level carbon tax would depress economic growth in the commonwealth. 

“The report by the Beacon Hill Institute indicates the tax would cause a loss of $2.254 billion in state production, along with $925 million in private investment and $1.950 billion in disposable income,” BHI’s Dr. David Tuerck and Massachusetts Fiscal Alliance’s Laurie Belsito write in an article recently published in Commonwealth Magazine

“What she [Representative Benson] doesn’t recognize is that, by shrinking the economy, her carbon tax would cause the state to lose revenues from existing taxes,” Tuerck and Belsito write. “We find that the carbon tax would raise $1.253 billion in new taxes but cause the state to lose $326 million in existing revenue. If she uses 70% of the remaining revenue to compensate households and businesses, that will leave barely enough for her infrastructure fund.”

Representative Benson’s carbon tax bill rebates 70% of the revenue raised by the tax back to Massachusetts taxpayers. Those rebate checks would be subject to federal and state income taxes, which is a fact not advertised by Benson and supporters of her carbon tax bill. 

The national carbon tax bill introduced by more than 50 Democrats in Congress and Representative Francis Rooney (R-Fla.), like Rep. Benson’s bill in Massachusetts, directs the government to send payments to households in order to compensate for the increased costs that will follow the imposition of a carbon tax (higher gas prices, utilities bills, and grocery prices, to name a few). However, these payments, termed "dividends" by Rooney and other carbon tax proponents, are subject to federal and state income tax. Likewise, the rebates included in Rep. Benson’s bill would be taxed by Uncle Sam and Massachusetts. 

A report by the Citizens’ Climate Lobby, a group that advocates for a carbon tax, explains how the carbon tax proposal pending in Congress would also pinch social security benefits

"Over the income-related phase-in range for the taxation of social security benefits, each additional $1.00 of non-social security income causes an additional $0.50 or $0.85 of social security benefits to become taxable. In most situations, the ordinary income tax rate in the phase-in range is 10%; however, at some income levels, the rate is 12%. Thus, $1.00 of non-social security income — including income from the Dividend — will be taxed at effective marginal rates of 15%, 18%, or 22.2%."

Congresswoman Alexandria Ocasio-Cortez’s (D-N.Y.) chief of staff, Saikat Chakrabarti, recently told an advisor for Washington state Governor Jay Inslee (D) that Representative Ocasio-Cortez and her staff view the goal of the Green New Deal as something different from what is publicly advertised.

“The in­ter­esting thing about the Green New Deal,” Chakarbarti said to the Inslee advisor, “is it wasn’t orig­i­nally a cli­mate thing at all.” Inslee‘s advisor responded to this remark with a “poker face,” the Washington Post reported. “Do you guys think of it as a cli­mate thing?” Chakrabarti added. “Be­cause we re­ally think of it as a how-do-you-change-the-en­tire-econ­omy thing.”

It seems some proponents are trying to sell the Green New Deal to the public under false auspices. Regardless of whether the Green New Deal and related tax hikes are marketed as a “climate thing” or a “change-the-entire-economy thing,” there is a wealth of research indicating that a carbon tax would depress economic growth and disproportionately harm low income households. 

The imposition of a carbon tax will be difficult for small businesses with thin profit margins to bare. The Canadian experience with carbon taxes, which are championed by Prime Minister Justin Trudeau, demonstrates how a carbon tax also increases costs for local governments by inflating heating and cooling bills. 

The Calgary Herald reported last year on how the carbon tax there saddles school districts with millions of dollars in additional energy costs: 

“A public school trustee is asking if the province would consider exempting school boards from the carbon tax after administrators revealed this week that the Calgary Board of Education paid about $3.3 million last year for the levy and has been forced to take buses off the roads” 

400 students were kicked off public school buses in Canada as a result of the carbon tax, creating a difficult situation for affected families. “As a result, fewer buses have meant fewer stops, longer commutes and more difficult schedules for families,” The Calgary Herald reported. “Many students have also been transferred to public transit.”

Given what winter in Massachusetts looks like, if Bay State lawmakers are determined to impose a carbon tax across the commonwealth, they should factor in how it will increase heating costs for public schools, which will squeeze out other local spending priorities. More than 50% of the Massachusetts Legislature has signed on as a cosponsor of Representative Benson's carbon tax bill. As such, Governor Charlie Baker (R) might be the last line of defense against the nation’s first carbon tax. 

Aside from all of the policy arguments against a carbon tax, elections and public protests that have taken place over the past two years in France, Australia, Canada, and in the U.S. provide further evidence that carbon taxes are politically toxic. Americans for Tax Reform has produced a timelinedocumenting the numerous times voters have rejected carbon taxes in recent history, both in the U.S. and abroad. 

NBC’s Lester Holt deserves credit for pressing Senator Bernie Sanders at the last debate, asking the Democratic Socialist from Vermont how he expects to make a single-payer health care system work nationally when Sanders’ home state tried and failed to make it work only a few years ago. Likewise, a future debate moderator should consider pressing the candidates, has Holt did, on how they expect to impose a carbon tax nationally, or other taxes and regulations related to climate change, when no one can even convince the Democrats who run blue state governments to lead by example and implement similar policies at the state level.


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