Energy & Environment

Obama Would Impose New Energy Tax on Everyone

Over the next few weeks we will be arguing the merits of an issue that I have spent nearly 10 years debating as a rank-and-file member, former chairman and now ranking member of the Senate Environment and Public Works Committee. That issue is global warming and a cap-and-trade program to regulate greenhouse gases. Now, the President has included such a cap-and-trade proposal in his budget.  

The President did a good thing by including an estimate of the revenues that will be generated under such a proposal in his budget. It allows us to have an honest debate about the costs to the American people of a program of this magnitude — not to mention the enormous redistribution of wealth for pet projects and programs under the umbrella of “clean energy”…  

Regressive Energy Tax

The administration’s decision to include cap and trade and the revenues generated by it in the budget means my colleagues in the Senate can no longer hide the ball, avoiding discussion of what a program of this magnitude really is. And the public is finally beginning to pay attention. To put it simply, the public is realizing that cap and trade is a regressive energy tax that hits the Midwest and the South harder than the East or West Coasts. What the public will continue to learn, much to the dismay of my colleagues, is that the high costs of cap and trade can’t be erased with so-called “tax relief,” and cap and trade will have no effect on the climate.  

While huge numbers of lobbyists and companies are lining up inside the Beltway, outside of Washington, businesses and consumers are coming to realize that cap and trade is designed to deliver money and power to the government. There is nothing in it for taxpayers, consumers or the climate…

The purpose of these programs is to ration fossil-based energy by making it more expensive, and therefore less appealing for public consumption. It is a regressive tax that imposes a greater burden (relative to resources) on the poor than on the rich. That is because the poor spend a larger percentage of their income on energy costs than the rich.  

Poor Burdened More

Need proof? The President’s own Office of Management and Budget Director, Peter Orszag, is on record while at the Congressional Budget Office restating what we know to be true: Higher energy costs will affect the poor more than the rich. “The rise in prices for energy and energy-intensive goods and services would impose a larger burden, relative to income, on low-income households than on high-income households,” said Orszag.  

Orszag was very clear that taxing carbon consumption will dramatically increase energy costs for consumers: “Under a cap-and-trade program, firms would not ultimately bear most of the costs of the allowances but instead would pass them along to their customers in the form of higher prices for products such as electricity and gasoline.”  

The rest of the country outside the Beltway is also beginning to wake up. The Obama administration should take note. In the last month alone, there has been a slew of articles detailing how cap and trade is an elaborate system designed to tax the public and raise energy costs. Here are excerpts from several:  

Wall Street Journal: “Cap and trade, in other words, is a scheme to redistribute income and wealth — but in a very curious way. It takes from the working class and gives to the affluent, takes from Miami, Ohio, and gives to Miami, Fla., and takes from an industrial America that is already struggling and gives to rich Silicon Valley and Wall Street ‘green tech’ investors who know how to leverage the political class.”  

Warren Buffet
: “That tax is probably going to be pretty regressive. If you put a cost on issuing — putting carbon into the atmosphere — on the utility business it’s going to be born by customers. And it’s a tax like anything else.”  

CNBC’s Jim Cramer
: Obama’s budget is “pushing an aggressive cap-and-trade program that could raise the price of energy for millions of people.”
 
The Detroit News: “President Barack Obama’s proposed cap-and-trade system on greenhouse gas emissions is a giant economic dagger aimed at the nation’s heartland — particularly Michigan. It is a multibillion-dollar tax hike on everything that Michigan does, including making things, driving cars and burning coal.”  

All of these comments reflect the numbers that were released in the President’s proposed budget, which estimated that a cap-and-trade program would generate $646 billion in federal revenue through 2019. Wait until they discover that the costs of such a program will actually be much higher…

Let us be honest. The total costs of the program will be well over that $646 billion when you factor in the private-sector mandates and the total costs to reduce emissions. If past economic models are any indication, the total costs of a program could be three times more expensive than what the administration’s numbers predict. And the administration’s numbers of just the auction revenues aren’t small, roughly $80 billion per year…

$1 for Every $8.40 Paid

Now you will hear that some of these revenues are going to fund tax relief and be returned to the people. For purposes of this budget proposal, the administration plans to spend $15 billion per year to fund clean energy technologies and will allocate $63 billion-$68 billion per year to pay for the “Making Work Pay” tax credit, a campaign promise that was not linked to climate change or offsetting increased energy costs that would result from a cap-and-trade system. We saw a similar example of this in the Lieberman-Warner debate last year in which sponsors tried to argue that the redistribution would offset the balance of revenue or taxes being taken in by higher energy costs. However, we learned firsthand that this wasn’t true. While the bill’s sponsors tried to convince us that there was actually tax relief in the bill, we learned that families and workers would still have to pay $6.735 trillion into the system in the form of higher energy costs to get back an estimated $802 billion in tax relief. That’s a return of $1.00 for every $8.40 paid…  

Finally, my colleagues may argue that at least this money will be going to a good purpose, for the cause of fighting global warming and having America lead the way. However, I think many would find it very troubling indeed to learn that even if you believe the IPCC science on climate-modeling, the science dictates that it will be ineffective. EPA even confirms it. Put simply, any U.S.-only attempt to avert global warming is a futile effort without meaningful, robust international cooperation. I believe the American people should at least be aware that cap and trade is all cost with no benefit…  

Under the guise of transparency and honesty, which the administration has stated numerous times is one of its top priorities, I think it is fair game for the American public to be informed about both sides of this story.… If it is time for anything, it is time for us to get realistic about these policies, and focus on what is achievable, both globally and domestically, to help bring down energy costs to consumers and make us more energy secure so the American public doesn’t get yet another raw deal.

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