By Jonathan Chait
Environmentalists have been trying for a quarter of a century to enact a tax on carbon emissions without coming anywhere close to success. At first blush it seems absurd to believe they might achieve it under a president who denies the very existence of anthropogenic global warming and can’t seem to pass even bills he likes. In the face of this discouraging reality, some Democrats think they have a chance to pass a carbon tax in this congressional term. And the crazy thing is, it’s possible they’re right.
The logic runs as follows. Republicans really want to cut taxes on corporations. But Senate rules prohibit anything that increases the deficit after the end of a ten-year period. Their first plan was to pay for the corporate tax cuts by imposing a border-adjustment tax. That plan has fallen through, leaving Republicans with no way to pay for their hoped-for cuts.
They could just pass some temporary tax cuts instead. And they probably will in the end. But the deal Democrats are offering would be to impose a carbon tax that could raise a couple trillion dollars in revenue over the next decade, at least some of which could pay for the corporate tax cuts Republicans crave.
From a Democratic standpoint, using carbon taxes to offset corporate taxes presents a painful trade-off. Corporate taxes are ultimately borne by owners of those firms, who are overwhelmingly rich. Since poor and middle-class people spend a higher percentage of their income on energy than rich people do, a carbon tax would be regressive, most calculations have found. (See this study by Brookings, and this one by the Carbon Tax Center, both of which support such a tax anyway.)
Most Democrats hate the idea of shifting the tax burden from the rich to the middle class. But most of them hate the idea of letting the planet burn even more. Climate change is a more urgent problem than tax progressivity. Democrats can always win power and fix the tax code later on, but greenhouse gases can’t be un-emitted very easily.
The regressivity of the swap is what makes it potentially appealing to Republicans. The deal gives them a chance to pursue their highest-priority objective of reducing the tax burden on the affluent. Better still, from their perspective, a bipartisan deal would actually give them cover from otherwise devastating attacks on a highly unpopular policy. (Two-thirds of the country think corporations already pay too little tax. Members of each party would get a win on the thing they care about most: curtailing climate change, for the Democrats, and lowering taxes on corporations, for Republicans. It is the rare issue where bipartisan agreement makes sense because, while the two parties don’t agree, they do care about different things, and each side could get a win on the thing it cares about most.
Obviously, Donald Trump doesn’t care about stopping climate change — but, on the other hand, he doesn’t really care about many policy goals at all. He likes winning. If there’s a bipartisan deal that he can sign, he probably would. It’s worth noting as well that Trump is driven much less by opposition to Barack Obama’s policy goals as hatred (and jealousy) of Obama’s policy achievements. If Trump could gain credit for progress on an issue Obama also wanted to make progress on — and perhaps the opportunity to boast that he could make a deal Obama couldn’t — it might well strike him as attractive.
One intriguing detail in the Times story is a non-denial from the administration: “Asked where a carbon tax stands in the administration’s deliberations, a White House spokeswoman, Kelly Love, said in a statement, ‘We don’t officially comment on legislation unless it’s something we are actively supporting or is about to be considered in Congress.’” Of course, the Trump administration comments on policy all the time. The most likely reason they’re hiding behind a pretend no-commenting-on-legislation rule is that at least some officials in the administration want it to happen.
To be sure, large obstacles exist. States that produce or consume especially large levels of dirty energy would lose. Some of the revenue could be used to compensate them, but it’s tricky. At least some oil companies claim to favor a carbon tax, but it remains to be seen if that support is more than theoretical. Coal companies would probably fight it to the death, since any effective carbon tax would have to dramatically curtail output of the dirtiest energy source.
Obviously, translating the abstract logic of a bargain into actual legislation presents a massive challenge in a largely broken legislative system with a half-mad president. The safe bet remains either a partisan tax-cut bill or failure. But the carbon tax deal is sitting out there, more likely to happen now than ever before.