Summers joins the call for a tax on carbon

January 5th, 2015 at 9:44 am

Larry Summers joins me–and too few others, IMHO–in recognizing this as a good time to introduce a tax on energy, in his case a broad carbon tax. Unlike the idea I and others have touted–a small, phased-in bump up in the federal gas tax that’s been stuck at $0.18 since 1993 that would then be devoted to shoring up the highway trust fund, which is scheduled to go bust by May–Larry goes broader, advocating a “$25-a-ton tax on carbon that would raise far more than $1 trillion over the next decade would lift gasoline prices by only about 25 cents.”

According to the NYT, neither of us are being realistic.

When gasoline topped $4 a gallon, opponents of an increase in the gas tax argued that prices were already too high.

Now the average price of regular gas has dropped under $2.50 a gallon, but in the antitax environment that pervades Washington there is still scant support for increasing the gas tax to finance upkeep of the nation’s roadways and public transit systems.

The no-­win dynamic is frustrating to advocates who hoped falling gas prices might reinvigorate the idea of raising the gas tax, which they view as one of the simplest, fairest and most efficient ways to pay for transportation repairs and improvements.

Is the Times right? I get Larry’s “in for a dime, in for a dollar” message, but it’s probably more realistic–or less unrealistic–given the makeup of the new Congress and where they are on taxes to think smaller and more targeted. So I’d push my idea over his. A gas tax is, of course, also a tax on carbon, but a few cents a gallon (say a nickel/gallon a year phased-in over three years) won’t be felt by drivers either now or even down the road when gas prices go back up.

On the other hand, I fear we’re probably both wasting our breath, at least at the federal level. Yet here again, the action is sub-national, and some states have moved on this. As with all those state minimum wages, this creates a useful natural experiment wherein we can collect data on the impact of these state gas tax increases on their economies, budgets, and residents’ incomes. That way, if facts should once again matter, we’ll have some evidence as to the actual impact versus the ideologically inspired cartoon impact.



Source: NYT, link above.



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4 comments in reply to "Summers joins the call for a tax on carbon"

  1. DG says:

    It’s the right call but the wrong name … until a name is created that puts it at the moral equivalent of sewage “taxes” it will be DOA.

  2. Robert Salzberg says:

    “I get Larry’s “in for a dime, in for a dollar” message, but it’s probably more realistic–or less unrealistic–given the makeup of the new Congress and where they are on taxes to think smaller and more targeted.”

    For clarification, Dr. Bernstein, what makes you think that the a Republican House & Senate will violate their Taxpayer Protection Pledge and vote to increase net taxes? Isn’t the chance of this Congress voting to raise any taxes somewhere South of hell no? (With the possible exception of cutting tax breaks like the EITC and subsidies for the ACA which would be matched with tax cuts for rich people and corporations so would not violate Norquist’s pledge.)

    Republican solutions to getting more money for infrastructure are clear. They want to give away the current infrastructure like roads and water systems to private industries, subsidize those industries with loans and tax breaks and have the private industries increase fees and toll roads instead of increasing taxes. Am I wrong?

  3. Timothy Underwood says:

    Long time lurker. The thing is if the goal is reduction of the carbon footprint anything which ignores coal is non-serious. A tax on coal plants would be far more valuable than one on gasoline.

  4. Mark Wegman says:

    How about a trade off. The Republicans want the Keystone pipeline approved. The main reason to oppose it is it enables particularly dirty oil to be pumped, leading to more CO2 in the air. Even a small carbon or gas tax would probably cause us to save more CO2 than the difference between the Tar sands oil and the Saudi oil.

    If Obama veto’s the Republican legislation they might want to compromise — though they are Republicans so that may be less likely.