National Security & Defense

Why the Democrats Are Fighting the Biggest Carbon Tax in American History

Supporters of Washington’s carbon-tax initiative (image via Twitter)
They don't like that it's revenue neutral.

Dr. Yoram Bauman, who is leading the effort to pass a carbon tax ballot initiative  in Washington state, is nobody’s idea of a conservative, and his ballot initiative is hardly conservative, either. It will raise an estimated $1.7 billion annually in carbon taxes, eventually (after a slow build over many years) generating about $100 per ton of carbon emitted (in 2016 dollars), a price far higher than exists anywhere in the world today.

“This would certainly be one of the most aggressive — if not the most aggressive — carbon taxes that we have on the books globally,” MIT professor and carbon tax expert Christopher Knittel told the Seattle Times. According to Bauman, the initiative could raise gas prices immediately by 25 cents a gallon rising to $1 per gallon in real terms by mid-century, while raising the price of electricity as well.

So imagine Bauman’s surprise that his initiative, with its approach that has long been endorsed by economists as the most cost-effective way to reduce carbon emissions, was opposed by the state Democratic party and virtually all of the state’s leading environmental groups. The reason for their opposition points at the corruption at the heart of the climate-change movement. I have touched on other elements of this corruption (the alliance between the forces of climate panic and a biased media) last week in NRO, – but as the experience in Washington State shows, the rot goes deeper.

Bauman (whom, in full disclosure, I have known personally and professionally for almost two decades) has earned environmentalist and Democratic-party ire by committing the grave sin of making his tax swap “revenue neutral.” Revenues gained from the carbon tax would be offset with a one-cent reduction in the state sales tax and reductions in various business taxes, along with income tax credits of up to $1,500 for low-income families. So, at least in theory, the overall tax burden will not increase.

RELATED: Another Obama Legacy: Americans Will Pay Billions for a Useless Climate Agreement

There is a lively debate among conservative economists about the possibility of carbon tax swaps — some are open to them and some hate them — but it’s not a pie-in-the-sky prospect or an inherently radical left-wing scam. In fact, Bauman has won the support of several Washington State GOP legislators for his proposal. Bauman has modeled his proposal on a well-regarded policy in British Columbia that has, for almost a decade, resulted in a net tax cut for British Columbians while reducing carbon emissions by a substantial amount relative to the rest of Canada. Indeed, “fears” that the carbon tax shift might, horror of horrors, lead to a net tax cut has been one of the principal reasons left-wing activists have argued it should be opposed.

None of this is surprising to me. In my academic research, I focus primarily on energy issues. In the most recent issue of the peer-reviewed journal Energy Policy, along with my Hoover colleague David Fedor, I published an empirical analysis on all of the carbon-pricing regimes worldwide

In our research we find a clear, though not uniform, relationship between the ideology of the government enacting a carbon tax and the percentage of revenues recycled (i.e. refunded to the taxpayer through other tax cuts) and/or used in general funds. We show that conservative governments are far more likely to return the taxpayers their money raised through carbon pricing than are their liberal counterparts, who are more likely to want to spend it on “green spending”.

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And this exactly the dynamic playing out in Washington State. In opposing the tax, the Sierra Club argues for a tax that works to “address climate change in ways that will benefit all communities in our state. This includes communities of color, low-income, environmental justice, and labor.”

In other words, rather than using price signals and market forces sort out the best way to make reductions, they demand that we grow government while making payoffs to labor unions and minority politicians (who would otherwise generally have this issue low on their priority list).

Meanwhile Washington State liberals are quick to laud California’s “cap and trade” system as preferable to a carbon tax. A leading liberal blog in Washington points out that the billions in hidden taxes the system has raised in California have gone to fund high-speed rail (a hugely unpopular and expensive boondoggle that is unlikely to ever get built), weatherization for low income homes (likewise a huge source of graft and corruption), and affordable housing (not clear what affordable housing has to do with climate-change, but you can bet that some Democratic-connected group is making money off of it.)

For power players on the environmental left, virtue-signaling, Republican-bashing, and state control are ultimately more important than emissions reductions.

As one Washington progressive put it, “Revenue neutrality is one of the last things this state needs.” So much for bipartisanship. The real deal the Left offers the right on carbon is to trade something that conservatives generally don’t like (a carbon tax) and add to it something else conservatives don’t like (green crony capitalism and corrupt pay-to-play deals) — with no corresponding tax reductions or offsets, let alone badly needed environmental regulatory reform that might bring otherwise skeptical legislators on board. And yet they claim to be mystified that they can’t get those evil Republicans to support them.

As Harvard Economist Gregory Mankiw, chairman of the council of Economic Advisers under George W. Bush and a supporter of a revenue-neutral carbon tax swap, wrote about the controversy: “To be sure, a person can favor both a more environmentally friendly tax policy and greater government spending. But there is no good reason to marry these policies. If the goal is to build a political consensus to tackle climate change, there is good reason not to.”

Mankiw is correct of course, but “build[ing] a political consensus to tackle climate change” is not the primary goal of the most politically powerful forces in the climate movement. There are, of course, genuine “climate idealists” in the movement such as Bauman and many other groups and individuals that have broken with the state party and environmental groups and endorsed the measure. They may or may not be right on the overall question of climate change, but at least they have shown they are more concerned about doing whatever it takes to reduce carbon emissions than they are about checking off left-wing wish lists. But for power players on the environmental left, virtue-signaling, Republican-bashing, and state control are ultimately more important than emissions reductions. They want to make sure a conservative can be “correct” on climate is to swallow a huge-dose of left-wing politics with it.

Perhaps frustrated by the politicized opposition to his proposals, Bauman accused his fellow lefties in an e-mail to Mankiw of having “an unyielding desire to tie everything to bigger government, and a willingness to use race and class as political weapons in order to pursue that desire.”

#related#Bauman is seeing what those of us on the right have long observed.  If the only way to express concern about the environment and potential climate risk is to grow the government and empower the Left, conservatives will quite sensibly reject this approach. Too many liberals are dishonest about the left-wing politics that seemingly come embedded their declarations on climate science. When push comes to shove, the real agenda of much of the climate movement is not fewer emissions — it’s more government. Until that changes, conservatives have no good reason to engage with them.