Economics pollution tax

Published on January 5th, 2017 | by Steve Hanley

Fox News Advocates For Carbon Tax. Are You Kidding Me?

January 5th, 2017 by  
 

If you needed more proof that America is now operating in alternate reality mode, Fox News has just published an op-ed piece in which the author advocates for a carbon tax instead of the CAFE fuel economy rules that have been in existence in one form or another since the 1970’s.

carbon tax

You might think the piece is just another mindless “all regulations are bad” attack so popular with alleged conservatives and funded by the Koch Brothers and their cabal of fossil fuel friends. Conservatives like to waggle their fingers at evil regulators but what they really want to do is fatten the wallets of their wealthy benefactors. Not so in this case.

Professor Arik Levinson, a professor of economics at Georgetown, proposes using the money raised by pollution taxes to benefit the poor — a segment of the population traditionally ignored by rabid Tea Party conservatives. It’s a refreshing and straightforward look at one way to deal with environmental pollution that actually makes sense. It’s so well done, we decided to reprint it in its entirety, in the hopes that it will spark some conversation among our readers.

I have only one suggestion for Professor Levinson. Don’t call any idea a tax. No matter how good a thought it might be, people hate taxes. The very idea of another tax is like getting a tooth drilledwithout the benefit of Novocaine for most people. If you want folks to listen to an idea like this, call it a fee. And so, without further ado, we give you Professor Arik Levinson.

“If the Trump administration is going to repeal and replace any one policy, here’s my nominee: Let’s shift environmental rules away from government-regulated energy standards and toward taxing goods and services responsible for the most pollution. Done right, the shift would cost less and reduce pollution more, without hurting lower-income families more than wealthier Americans.

“You can find economists on opposite sides of many issues, but this is one area where most of us agree: taxes that target pollution are the least costly way to improve environmental quality. But in the U.S. we don’t follow that advice. Instead of taxing electricity generated by polluting power plants, we enact building energy codes and appliance efficiency standards. Instead of taxing gasoline to reduce auto emissions, we set fuel economy standards for cars.

“The most common argument against pollution taxes is that they would be unfair. Poorer families spend a bigger share of their income heating their homes and fueling their cars, and would therefore pay a bigger share of their income in pollution taxes. Or so the argument goes.

“But nobody stops to ask whether the efficiency standards we’ve enacted instead of pollution taxes are less unfair — or more unfair. As an economist, I’ve tried to answer that question. In a new paper [published by the National Bureau of Economic Research – Ed.]  I compare efficiency standards and pollution taxes side by side and show that efficiency standards cost poorer households even more than a pollution tax or energy tax would, and richer households less.

“In other words, we are already being more unfair to less well-off people than we need to be, with less pollution cleanup to show for it. Take cars for example. Since 1975, the Corporate Average Fuel Economy (CAFE) standards in the U.S. have required each carmaker to meet an average miles-per-gallon target across all cars sold. That lowers the amount of gas needed to drive a typical new car, but raises its sticker price by around $1,000.

“To achieve the required overall average, carmakers raise the prices they charge for the gas guzzling cars they sell relative to their more efficient models. So the standards act as sort of a tax on inefficient vehicles, instead of on the gasoline used by those vehicles.

“Under which policy—gas taxes or fuel economy standards—do poorer families fare better? Consider a relatively modest gasoline tax, say 30 cents per gallon, one estimate of the climate cost from vehicle tailpipe emissions. Compare that to a tax on inefficient vehicles that would raise the same revenue and be comparable to a CAFE standard. Richer families buy more gasoline and own more cars, so they’d pay more either way.

“But even though the richest families own three times as many cars as the poorest, they use four times as much gas. That means those wealthy families will pay less for a car tax than a gas tax, relative to their poorer neighbors. Both policies impose unequal burdens on the less well-off vs. those with more income. But the method we now use does less for the environment and costs lower-income families more.

“It gets worse. Starting in 2011 the CAFE standards were modified to be even more costly for lower-income families. The new standards adjust for each car’s “footprint,” or size measured by the area within its four tires. Automakers selling larger cars now get to meet less stringent miles-per-gallon standards than sellers of smaller cars. The 2011 change lowered the penalty on larger cars. Since richer families typically drive larger cars with worse fuel economy, that change tilted the CAFE standards even more in their favor.

“There’s another factor to consider. Either policy—taxes or standards—can be skewed in favor of rich or poor families simply by changing who gets the revenues collected. If the revenues from pollution taxes were used to subsidize vacation houses or reduce capital gains tax rates, poorer Americans might find that unfair. But if the revenues were spent on early childhood education or to reduce the payroll tax, that would favor those less well-off families.

“Somewhere in between there must be a compromise that would lead to sensible pollution taxes that would be better for the environment and for less fortunate Americans.”

30 cents a gallon seems like very little money considering all the damage fossil fuels do from rising sea levels to millions of negative health impacts worldwide every year. Would you support such an idea? Why or why not?

Source: Fox News    Photo credit: Library of Congress

 





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About the Author

I have been a car nut since the days when Rob Walker and Henry N. Manney, III graced the pages of Road & Track. Today, I use my trusty Miata for TSD rallies and occasional track days at Lime Rock and Watkins Glen. If it moves on wheels, I'm interested in it. Please follow me on Google + and Twitter.



  • mb

    I would support this as I think one should pay according to what one consumes/pollutes. This should apply to business as well as individuals. It’s a bit sad but most people still make decisions based on what’s in their wallet. On the bright side I don’t believe this idea goes against any religion…

  • darth

    I would totally support this if the fee was reasonable and was increased annually until fossil fuels were gone entirely.

  • Burnerjack

    Any regulation that is based on monetary policy is inherently unfair to the poor.
    Put a extra $3.00 tax on every gallon of fuel. Would do wonders for the push toward an electric transportation system, right?
    Would that affect a person making $100K and commutes 40 miles/day and the person making $28K and commutes 20 miles/day?
    The former pays twice as much added tax but presumably pays far less as a percentage of expenditures and income vs. the latter.
    The latter was probably just surviving and now may not be able to afford to commute that far.
    The answer? Make EVs cheaper to own and operate than the fossil fie cousins. Not by making the burners more expensive, but by making the EVs easier to afford.
    Just my 2c.

    • Mike333

      Did you read the article before posting?

      • Burnerjack

        Gotta admit, I did just a quick scan and mistly just reacted to the question.

  • Ken

    Doubling the price of gasoline wasn’t sufficient to move the fuel efficiency of cars in Europe enough to make a real difference. They had to apply regulations like CAFE to get improvements. The proposed tax of $30/ton carbon equivalent is so tiny it has no impact on car fuel efficiency nor miles driven. This has been proven repeatedly in Canada where many localities already have much higher gas taxes.

    • Jim Smith

      Taxes are never the cheapest or best way to solve problems; that is not why taxes exist. Simply remove all the subsidies from fossil fuels and renewables win, hands down.

      • kevin mccune

        I like what you are saying , however is this invariably true ?

    • Ross

      Yes, in Europe people just pay the higher prices (much much higher than 30c extra a US gallon) because the alternatives have not been available. If people have to get to work by car they have little choice but to pay whatever the price is.

      An extra tax would raise revenue but it would have less impact on carbon emissions than requiring manufacturers to make more efficient vehicles. The poorest people buy used cars after most of the value has depreciated away. So the poor are not being hit by a significant amount by fuel efficiency standards.

  • Jim Smith

    “You can find economists on opposite sides of many issues, but this is one area where most of us agree: taxes that target pollution are the least costly way to improve environmental quality.”

    citation required as that is utter nonsense.

    • Mike333

      No, Economists have come up with a Carbon Tax to tax the negative externalities of carbon. This is standard economics. Pollution is essentially free unless you tax it. Otherwise the industry will pollute indiscriminately. Ask China.

      • Jim Smith

        maybe progressive economists, but not real economists.

        • Mike333

          Take an Econ 101 course at your local community college.
          Nothing you say even makes sense.

          You just spout right wing slogans, which are based on nothing. What pet projects are you talking about. Congress has taken away those pet projects, but Paul Ryan may put those back this session.

          Bloated government? Where? Maybe the military, but not in agencies. IRS, SEC, EPA all under funded.
          Repubs like high income tax payers to not get audited.
          Same with the SEC, underfunded so they can’t prosecute Wall Street Fraud effectively.
          And the EPA. Repubs at war so they can pollute with Fracking and not get caught.

          Who is going to enforce “Respect for Private Property”? When your neighbor fracks and destroys your well water? What is an underfunded EPA going to do about it? Sure, you could now test the water and court order a second test of your neighbor’s fracking site, to get it’s pollution signature, but that’s expensive and a lawyer court battle.

          “Corrupt Government” decided the common good of polluters…
          Do you mean the Exxon/Koch funded Republican party?, with some Democrats too have funded pols to allow the frackers to pollute? Yes, true. But a carbon tax would give them incentive to cut their pollution back because it would be more expensive to do so.

          They tell you what a carbon tax will be used for, to cut the taxes of the poor, to raise their standard of living. They’ll buy move food, clothes, and possibly more education, but they’ll have more money to pay for the higher price of gas too.

          • Jim Smith

            ROFL. how about nothing you say makes sense. take a constitution 101 class. You spout progressive slogans which are based on lies and complete nonsense.

            Congress has taken away no bloat as Obozo and his cronies have run up more debt than all previous presidents combined ensuring future generations will default. That is called a fact.

            All those agencies should not exist. But in reality, under funded does not mean something is not bloated. Only progressives would think we need more government.

            Hate to break it to you, but with the failed Obozo in power fracking is happening and has been happening. What has he done about the pollution? NOTHING.

            The government decided the common good of pollution over rides private property. So big government created the entire pollution problem and has been “fixing” it for many decades in typical failed fashion.

            Hate to break it you, my misinformed progressive, but Buffet oil trains ain’t clean. The Koch brothers are nothing compared to the evil of Soros, Buffet, and Gates.

            ROFL. A carbon tax hits the poor the hardest. You are so clueless you do not even understand reality. Stop watching the progressive propaganda outlets (CNN, ABC, CBS, NBC, MSNBC, Slate, Huff Post, Atlantic), as they have poisioned your mind with total garbage.

            https://uploads.disquscdn.com/images/f028ccf016966d2398350b61ac5e559ac499623229bcfc85a553541f14981f3d.jpg

          • kevin mccune

            My goodness ,I find this is so true of the ” Fruitbats ” and diehard Liberals .

          • Mike333

            “You are so clueless you do not even understand reality”

            Look up “Projection”.
            Sorry I wasted your time.

          • Epicurus

            “The government decided the common good of pollution over rides private property. So big government created the entire pollution problem. . . . ”

            This is certainly true with respect to some forms of pollution. Companies were actually granted permits to dump toxins into our rivers, for example. On the other hand, what role did big guvamint play in automobile emissions (or emissions from coal stoves, wood stoves, etc.)?

            What’s the private property solution to auto emissions? Do you think you can enjoin people from using their ICE vehicles? Do you think you can obtain a judgment for damages from the ICE owning public?

          • Jim Smith

            private property rights

          • Epicurus

            Rights of any kind exist only to the extent they can be enforced in a court of law. My two questions were about what kind of remedy is obtainable for others’ violation of your right to clean air.

            This is where libertarian theory goes off the rails.

  • Mike333

    Don’t get too excited. See if this “editorial” position lasts for longer than two weeks. Fox News is an oil industry infomercial. This could just be Exxon’s Check is late again. This happens every other year. Someone at Exxon thinks Fox really believes their climate bull, and thinks the check is unnecessary. Then they start seeing Real News, Economics and Science coming out of Fox, and then Rush Overnight a Check.

  • trackdaze

    Unfortunely, you need both some base line regulations and a consumption tax .

    • Mike333

      I agree. Put more money in consumer’s hands AND give them only Energy Star choices, for this to be effective, otherwise they’ll just buy junk.

  • Austin

    Are you all serious? This article shows a clear approach that democrats and republicans can agree on to save our planet. This is not the time to quibble over details when the solution is already available and agreeable! I strongly believe a carbon tax/fee is the perfect way to disincentivize carbon use.

    I do believe, however, that we should do all we can to help the lower income population through legislation. Citizen’s Climate Lobby (CCL) has a plan to 1) put a fee on carbon, 2) return all the generated money to the population equally, and 3) put a tariff on goods from other countries that don’t have a carbon price.

    The effect of CCL’s plan includes the disincentive of the carbon tax and actually benefits low income people financially. Also, the plan is revenue neutral, so republicans have a higher chance of getting on board. It’s all about making policy that will solve our problems while being politically feasible.

    Go carbon tax!

  • Steve Hess

    The main problem with a gas tax is that the additional cost is hidden. This is why inkjet printers are cheap and the ink is expensive, or razors are cheap and razor blades are expensive. Also, there is just no way to assure that any additional tax revenue would go to the poor. Don’t forget that used cars are generally much less efficient. The poorest families buy the oldest cars and will be paying the highest in gas tax per mile.

    There is a simple way to solve all of these problems. If the fee was applied at the time of purchase it is no longer hidden and does not penalize the owners of the 100 million cars already on the road. Just calculate the fee using the EPA fuel economy estimate over the first 100,000 miles. Better yet, make it revenue neutral by giving a rebate for each new car sold. The rebate would be the same for every car sold, so it would not affect the purchasing decision.

    Bonus: This does not necessarily change the price of the car in the short run. As stated in the article, each car manufacturer already applies a feebate internally. The public feebate would just replace the internal one. The math gets a little complicated, but it can be shown that maximizing profit will not minimize the fee in an internal feebate. Changing this to a public feebate creates competition to minimize the fee. Money is transferred from companies with inefficient fleets to companies with efficient fleets.

    • Steve Hanley

      I have some thoughts. Assume I am in the cesspool pumping business. When my truck is full, I can pay to dump my load at an approved treatment plant or I can leave it on your lawn and those of your neighbors.

      I have saved myself a ton of money but caused you significant harm. I know the analogy is gross and disgusting, but is that not what the fossil fuel companies have been doing for the past 100 years? They reap all the profits and expect society to clean up their mess.

      Elon Musk calls this situation “the turd in the punchbowl.” Economists refer to it as an “untaxed externality.” I hasten to point that “tax” is a technical term to economists. What they call a “tax” is not necessarily what you and I call a “tax” and misunderstandings can result if people do not understand the difference.

      Leaving my load of effuent on your lawn is an “untaxed externality.” To put it in other terms, an “untaxed externality” is a cost of doing business that is transferred to the shoulders others outside the business.

      I do agree that any tax or fee imposed will quickly be gobbled up by greedy politicians to enrich their friends so they can continue sucking at the public tit. Politicians understand untaxed externalities better than most, They are how they stay in office.

      As Huey Long once put it succinctly: “Don’t tax you. Don’t tax me. Let’s tax that fellow behind the tree.’ The drive to privatize Social Security, Medicare, the VA and anything else that isn’t nailed down is a current example of lading the general public with untaxed externalities that benefit a powerful few at the expense of the many.

      • kevin mccune

        One of the things not addressed is this ( FDR realized this ) if these programs are voluntary , then a lot of poorer people and wealthy will choose to opt out altogether and who does it hurt the most ? Why of course – the poorest people .
        Its time for a rational energy and healthcare policy in this country ,it has been said it takes ” a barrel of crude oil now , to produce three barrels of crude ” clearly something is amiss and sooner or later despite the Feds , furious money printing , we will have to ” pay the piper ” .

      • Steve Hess

        I agree with all of your points, but I’m not sure I understand your point. A feebate is a way of incorporating an externality without the negative consequences of a traditional gas tax. Are you suggesting a tax is preferable to the feebate? What positive value does the tax have over a feebate?

        • Steve Hanley

          Thanks for your question. I am not an economist and not qualified to deal with the technical aspects. To my limited understanding, a feebate is like what the Fair Tax people propose. In general, I approve the Fair Tax proposal, especially in so far as it removes the necessity for the IRS. But I worry the administration of a feebate program will just create another bureaucracy to replace it.

          My only point is that in any discussion it is essential to define one’s terms. For some, the word “tax” implies one thing, but when an economist uses the word “tax” it can have an entirely different meaning.

          Debates that do not have an agreed set of definitions are pointless.

  • BigWu

    Why not charge for the pollution up front?

    Per Consumer Reports, the average combustion car lasts 150,000 miles. A $0.30/gallon pollution tax paid up front would add $1,800 to the sales price for the average car, $900 for an efficient one, and $3,800 for a gluttonous beast.

    By charging up front, consumers can make more informed comparison and purchasing decisons based on sticker price. Additionally, lower income folks won’t be hit with a painful unexpected additional operating costs for their existing vehicle.

  • S.Nkm

    I support the idea, but the tax needs to ramp up and increase to its true value (whatever that is, something like $10, $15/gallon?) that includes the full cost of ALL externalities to be meaningful.

    • Steve Hanley

      Of course, the US military budget is also an untaxed externality. What has our adventurism in Kuwait and Iraq cost us so far? A couple of trillion and rising?

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