Memo to tax sirens: Both a carbon cap and a tax can be implemented well
Posted by Guest author (Guest Contributor) @ Gristmill at 1:40 PM on 19 Feb 2009
In the Odyssey, Odysseus had to be tied to the mast to resist the call of the Sirens, who tried to lure his ship onto the rocks. These days the siren song of a carbon tax fills the ear of many commentators who urge us to recognize its beauty and steer our ship in its direction. A Washington Post editorial is a recent example.
The premise of the Post editorial is that cap-and-trade regimes are complex and vulnerable to special pleading, and they do not guarantee success in reducing emissions, while a tax is simple and sure in its effects. But this is grass-is-greener thinking. The Post compares a flawed version of one approach (cap-and-trade) to an idealized version of the other (tax) and not surprisingly, the idealized approach wins.
The fallacy in this argument is that the same political body (our Congress) that, we are assured, will insist on putting special interest features into a cap-and-trade bill, but when presented with a tax approach, will vote only for the purest proposal, firmly rejecting all lobbyists’ pleas. Those who argue that a tax approach is less likely to be designed for special interests than a cap approach simply are ignoring the tax code. We have decades of empirical evidence in the U.S. that when Congress designs tax policies it rarely resists the entreaties of special interests…..
Economic impacts will be an important topic in a cap approach to be sure but the supporters of a cap proposal have something that tax advocates do not have: the ability to keep the focus on the direct and intended effect of the legislation — how much does it cut pollution? In a tax bill, the effects on pollution are indirect and run a much larger risk of being submerged in the more easily calculated impacts of the tax provisions on various fuels, consumer energy expenses, and different regions of the country.
