Clear Fog Blog

Political musings from Warren E. Peterson

Carbon Tax

Posted by Warren Peterson on June 30, 2009

In a June 30, 2009 Seattle Times opinion piece, Seattle economist Bruce Flory and Todd Myers from the Washington Policy Council proposed replacing the state property tax with a carbon tax. Such a tax would reduce the use of carbon-based fuels by making them more expensive. Leaving aside the controversy over climate change, benefits would include cleaner air, reduced reliance on imported petroleum products and it avoids the fraud prone Cap and Trade system. Additionally, in theory at least, the carbon tax would be revenue neutral to the government.

But nothing is ever perfect especially when it comes to taxes. A carbon tax is straight- forward and more transparent than Cap and Trade but less so than a property tax. Yes, thirty cents a gallon gas tax increase and elimination of the state portion of property tax is clear but things get a little murky when it comes to the costs of other carbon using products and services. How much will the price of airline tickets, Fed Ex deliveries, utility bills and plastic products rise as business passes on the effect of a new tax? Taxes affect economic behavior. Buy gas in Oregon, less flights requiring in state refueling, businesses locating out of state are all possible unintended consequences. A carbon tax reminds one of sin taxes. Government spends money discouraging smoking while at the same time increasing dependence on tobacco tax revenue.

Saving the environment and energy independence are goals of the war on carbon. It seeks to force development of alterative energy sources by making carbon energy prohibitively expensive. Unfortunately, new kinds energy could be years away and potentially costly. Electric cars will stress electricity supply. Replacing gasoline with hydrogen would require a huge infrastructure investment. Will a massive new tax move research and development forward faster or just provide another pot of gold for legislatures to slowly siphon off to other pet projects?

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