Don’t Buy The Carbon Dioxide Tax Myth – It Just Means More Government Control

By H. Sterling Burnett

The carbon dioxide tax is like the Hydra of myth. Every time some hero cut one of the Hydra’s heads off, two more sprang up in its place. The same is true for the carbon dioxide tax. Every time a version of the carbon dioxide tax is proposed, economists and other analysts deftly cut its head off, showing its promises of climate salvation and economic prosperity to be false, myths like the Hydra itself, yet two more versions of the tax arise.

Progressives and socialists embrace the carbon dioxide tax myth to promote more government control, their control, over the economy and peoples’ lives.

Sadly, a number of old mossback, Rockefeller Republicans have also embraced the myth of the carbon dioxide tax. The main attraction for them seems to be their belief they can create a revenue-neutral carbon dioxide tax. For them, it’s just a matter of political engineering. The problem is, the idea a carbon dioxide tax can be revenue neutral is just as much of a myth as that it will save the earth from climate doom (as if the earth needed saving, which the best science shows it doesn’t), or that it will increase jobs and boost the economy.

As my colleague James Taylor has persuasively written, no carbon dioxide tax is revenue neutral for the households being taxed. A carbon dioxide tax raises the price of coal, natural gas, and gasoline in an attempt to force consumers to purchase more expensive wind power, solar power, and electric vehicles. Although consumers will spend substantially more money on energy and energy-related bills, the wind and solar industries will pay no carbon dioxide taxes.

As Taylor points out, the tax revenue generated by a “successful” carbon dioxide tax — one that significantly reduces carbon dioxide emissions — will decline sharply over time, leaving little money to return to the people. Thus, although the government would not receive much revenue to return to consumers from the tax, people, now paying substantially more for their energy bills, will face a dramatic decline in their discretionary household incomes.

Nor will the tax be revenue neutral for households with workers in the fossil fuel industry or related fields. The idea that all the oil field workers, coal miners, coal and natural gas power plant operators, and those working in chemical and plastics manufacturing will be able to smoothly transition to other jobs without a hitch is a myth as well: their household incomes will fall sharply in the short-term if not permanently. And even if they could simply snap their fingers and magically switch jobs, the jobs they would be taking installing and servicing solar panels and wind turbines simply don’t pay as well as the jobs they will be forced out of by the carbon dioxide tax.

Nor, in truth, could any carbon dioxide tax be truly neutral in terms of government revenue.

Even if Congress and the president keep their hands out of the till, not finding creative ways to spend whatever new revenue a carbon dioxide tax generates, and returns it through some scheme to the people being taxed, it’s simply a fact a good portion of the revenue generated by the tax will be diverted to the bureaucracies involved in collecting it and disbursing the tax checks. No government program is cost-free.

Just as with every other government program, there will be huge transaction costs for collecting, tracking, auditing and archiving taxes paid and revenues paid out. New employees will have to be hired, or existing federal government workers will have to divert their time from other responsibilities, to account for the carbon dioxide taxes to be paid, assure that they are paid, to police the program, and to send out the revenue checks and handle complaints when disputes arise.

These and other costs will eat up billions of dollars each year. Unless these costs are paid directly out of the carbon dioxide tax revenues — in which case all the revenues will not be returned to taxpayers as promised — then the government will have to impose other taxes or take on additional debt to pay for the program. So much for revenue neutrality.

Anyone who tells you paying a new tax will be good for you, especially a tax on fossil fuels that serve to power the economic prosperity we currently enjoy, is lying. In the meantime, hang onto your wallets and when the time comes, vote any and all policymakers who support carbon taxes out of office.