The reform plan released this week by President Trump and congressional leaders doesn’t mention the highly controversial idea of a carbon tax, but analysts believe there’s a real opportunity for Democrats to push for fees on emissions as part of a broader, once-in-a-generation compromise on taxes.
As Republicans take on tax reform, they seem hell-bent on repeating the tactical mistakes they made during their attempts at health-care reform. Again GOP policy makers have cloistered themselves to develop a bill whose prospects will hang by a thread in the Senate. Yet there is a powerful bipartisan grand bargain in corporate tax policy waiting to be struck.
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.
Tax reform may be the last big initiative we will see out of Washington this year. Republican leaders have laid out an ambitious mission to make taxes “simpler, fairer, and lower” for American families, while also lowering tax burdens on small businesses and corporations so they can be more competitive. On the latter front, as the chief negotiators recently outlined in a joint statement, “The goal is a plan that reduces tax rates as much as possible, allows unprecedented capital expensing, places a priority on permanence, and creates a system that encourages American companies to bring back jobs and profits trapped overseas.”
With a sweeping overhaul of the tax code on the horizon, two Senate Democrats believe this is the moment to broach the third rail of climate change policy: a carbon tax.
The plan by the senators, Sheldon Whitehouse of Rhode Island and Brian Schatz of Hawaii, to level a $49 per metric ton fee on greenhouse gas emissions is widely acknowledged as a long shot. But the lawmakers, along with climate activists and a cadre of conservative supporters, insist the tax reform is a way to create bipartisan support. The senators propose to use a portion of the estimated $2.1 trillion they anticipate in carbon tax revenue over the first 10 years to reduce the top marginal corporate tax income rate, something the White House has called for.
Where can revenue scorers get the $1 trillion over 10 years the border tax was supposed to raise? Well, ahem, a carbon tax is also a consumption tax. To make it acceptable to free marketers, it would have to come with a full stop to all climate-related mandates and subsidies including fuel-mileage rules. It would also have to be clear that all carbon-tax proceeds are being used to cut payroll or income taxes.