N.C. State professor Michael Walden has hopped aboard the carbon tax and rebate bandwagon, penning a March 4 column on these pages calling for a new federal emissions tax and refund program.
A carbon tax is a regressive levy that puts the greatest strain on those who can least afford it, ostensibly for the purpose of altering global temperature. Yet Walden’s pitch for a carbon tax, which he dubs a “pollution fee” (who says academics don’t understand political messaging), left out key details as to what it would take to implement and operate the new tax and redistribution scheme.
Professor Walden acknowledges that the carbon tax he is calling for would disproportionately harm low-income households. That’s because carbon taxes drive up gas prices and utility bills, as Walden admits, by design. That is a feature, not a bug for carbon tax proponents. Walden and other carbon tax supporters, however, believe they have come up with a way to address this problem: a new form of welfare that will have the federal government sending payments to certain households to offset the added costs precipitated by the carbon tax.
More than a dozen bills to levy a carbon tax have been introduced in state legislatures over the past decade and all have been defeated, even in the bluest, most progressive states. But let’s set aside the fact that carbon tax proposals, even when accompanied by offsetting tax relief, have been repeatedly rejected by state legislatures and electorates (Washington State voters, for example, have twice rejected carbon tax ballots measures over the past five years, even one paired with offsetting tax relief).
Instead consider the new bureaucratic behemoth the federal government would need to create in order to process the new tax and redistribution scheme backed by Walden and some members of Congress.
The population of U.S. citizens is estimated at 297,958,900. Even if only 25% of the population received a carbon tax refund check, that would require some federal government entity to send out more than 74 million carbon tax refund payments every month. To put this in perspective, this new program would service more people than the Social Security Administration, which had 68 million beneficiaries as of 2019.
The Social Security Administration, mind you, is a massive bureaucracy with nearly 60,000 total employees. A carbon tax and rebate scheme won’t necessarily require a new bureaucracy of the same proportions, as the functions could be added to the purview of an existing agency, but the carbon tax and refund scheme will task some federal entity with a monumental bureaucratic undertaking.
Enrollment, eligibility determination, fraud prevention, case workers — to resolve lost, missing, or incorrect payments, custody and divorce issues (kids get the payments) and bank account number updates — software development, IT staffing, Human Resources management, legal staffing, and dozens of other logistical undertakings are the challenges that will need to be considered and rectified under a carbon tax and refund program.
Under such a program, congressional offices will need to allot some portion of time and staff resources to carbon tax-related calls, constituent letters, and related casework.
There are two more key points not mentioned by Professor Walden: 1) a carbon tax refund check would be subject to income tax, and 2) a carbon tax would significantly increase costs for state and local governments, as has been the experience in Canada with Prime Minister Justin Trudeau’s carbon tax. The Calgary Herald reported that the Canadian carbon tax increased energy costs for Calgary schools by more than $3,000,000 annually, forcing the Calgary school district to cut bus service for 400 children.
“Busing has been such a challenge for families, adjusting to schedules,” Calgary Board of Education trustee Lisa Davis said. “It’s a bit challenging that we’re in a situation where we’ve had to remove almost 400 students from buses in order to pay for the carbon tax in addition to the other impacts on the organization...that $3 million a year on power and gas is almost 25 per cent of our deficit — that is a very big number that has a big impact.”
2018 analysis of U.S. carbon tax proposals found “the average annual burden on the states and local government during the first 10 years of the tax would range from $18.9 to $30.6 billion in constant 2015 dollars,” and that “Dynamic revenue losses to the states and local government could make the total costs higher.”
You can punch a guy in the face and then give him a pain killer in the hopes it doesn’t sting as bad. But how about just not punching the guy in the face to begin with?
Likewise, a new form of welfare check could offset the financial pain a carbon tax would impose on low-income households, but how about we don’t create a regressive and unnecessary new levy to begin with, especially seeing as its proponents have yet to grapple with or address its administrative necessities and negative unintended consequences.
Patrick Gleason, is a part-time Haywood County resident and NC State alum. He is vice president of state affairs at Americans for Tax Reform and a senior fellow at the Beacon Center of Tennessee.