Representative Bob Inglis of South Carolina has introduced the “The Raise Wages, Cut Carbon Act of 2009”
It appears to be about the best energy policy effort I have seen come out of congress ever, other than the fact that his proposed carbon taxes are far too low. Congress should be debating this legislation with a significant increase in the proposed levels of taxation on carbon.
The following is from the Congressman’s summary of the bill:
THE TRIPLE WIN: ENERGY SECURITY, THE ECONOMY AND CLIMATE CHANGE
THE RAISE WAGES, CUT CARBON ACT OF 2009
The economic downturn calls for action to stimulate the economy, such as reducing the amount of taxes taken out of each paycheck.
Our ongoing dependence on foreign oil from hostile nations also calls for action to reduce that dependence and move to fuels of the future.
Even if you disagree with the science of climate change, everyone agrees that less carbon in the atmosphere would not hurt us. By reducing payroll taxes (employer pays 6.2%, employee pays 6.2% on the first $106,800 of income) and taxing carbon dioxide (something we want less of), we can turn an environmental fix into a decisive, economy-expanding national security fix.
Here’s a plan, proposed by U.S. Rep. Bob Inglis (SC-4). Similar concepts have been advanced by voices across the political spectrum – from President Reagan’s economics advisor Dr. Arthur Laffer to Vice President Al Gore:
STEP 1: LOWER TAXES ON LABOR
- Lower the payroll tax for employers and employees by an amount equal to a new tax on carbon dioxide.
- Prospectively increase Social Security benefits to help seniors pay higher energy bills.
In the first year, payroll taxes can be reduced by more than 10%, funded by a carbon tax of $15 per ton that will generate as much as $88.7 billion. The Social Security Trust Fund will not be touched; the swap is handled in the General Fund of the Treasury.
STEP 2: ATTACH A PRICE TO CARBON
- The proposed carbon tax starts at $15 per metric ton of CO2 in 2010 and increases to $100 by 2040, adjusted each year for inflation.
- To provide businesses certainty and the ability to plan, the bill includes a clear schedule of rates.
- The tax applies to fossil fuels as they enter the economy: at the mine mouth, the oil refinery and the natural gas. This upstream application of the tax will make it easy to implement and reduce administrative costs.
STEP 3: ATTACH THE SAME PRICE AT THE BORDER
- In order to accord similar tax treatments to domestic and imported goods, imported products will be subjected to the same U.S. carbon tax.
- As provided in the Constitution, the tax would be removed from goods destined for export from the U.S. Exporters would qualify for a rebate for the portion of their cost attributable to the carbon tax.
- Consistently applying the same tax to all domestic and imported products will keep this border adjustment in compliance with existing WTO agreements.
STEP 4: ENSURE REVENUE NEUTRALITY
This bill starts with reducing payroll taxes and sending more money home with the American worker. To preserve that principle, the bill requires a Supermajority vote (2/3 votes in both House and Senate) to overturn revenue-neutrality and use carbon tax revenue for any other purpose.
IMPACTS ON ENERGY PRICES
The tax will encourage energy consumers to replace carbon-intensive forms of energy with low- and no-carbon energy alternatives. Increasing demand for clean energy technologies will improve our environment, reduce our dependence on the politically volatile oil-producing regions of the world, and stimulate our home-grown innovation economy.
IMPACTS ON ECONOMY
With a commitment to reduce labor costs and internalize the cost of carbon in fuels, market forces will unleash innovation because of known costs and predictable returns for new technology. “Green jobs” would emerge from anticipation of cost competitive energy alternatives.
The Raise Wages, Cut Carbon Act of 2009 also leverages the double dividend, pursuing an increase in economic efficiency by reducing taxes on something we want more of (labor and income) and taxing something we want less of (carbon dioxide).