The Good Tax

For some Americans and their elected representatives, there is no such thing as a good tax. Even when it is clearly in the public interest, a new tax is considered one of those “third rails” that many politicians are afraid to touch.

But some types of taxes can be necessary, beneficial and fair. Now there is fresh evidence that a properly structured carbon tax is in that category. Researchers from the Massachusetts Institute of Technology and the U.S. Department of Energy’s National Renewable Energy Laboratory have concluded that a carbon tax can be structured to be effective in reducing carbon dioxide pollution as well as equitable to all Americans, including low-income households. Their study was published April 5 in the journal Climate Change Economics.

This is a report that policymakers here and in Washington, D.C., as well as candidates in this year’s midterm elections, should heed.

The research supports the position that whether we call it a surcharge, fee or pollution penalty, a tax on carbon-rich fossil fuels would have multiple benefits for the economy, the environment and public health. The MIT and NREL researchers also found that a fair and effective price on carbon, even if it is relatively low, could lead to reductions of carbon dioxide emissions sufficient to meet the U.S. near-term commitment under the 2015 Paris Agreement on climate change.

The climate benefits alone are important to people of both political parties who are concerned about the increasing severity and cost of weather disasters in the United States.

Last year, several distinguished Republicans, including former Secretary of State George Shultz and Treasury Secretaries Henry Paulson and James Baker III, launched a media blitz to support a carbon tax. The Niskanen Center, a libertarian think-tank, climbed on board, too.

A key reason for conservative support is that carbon-pricing aligns with free-market principles. The prices consumers pay at the pump or on their electric bills are nowhere near the full costs that these fuels impose on the economy, the environment or society. A price on carbon, many fiscal conservatives reason, would help “level the playing field” for all fuels that compete in energy markets — and they’re right.

Leaders left and right of center are listening to the nation’s top Defense officials and military leaders who have advised for several years now that climate change poses significant risks to national security. It is already threatening key U.S. military installations and operations both here and abroad. It is also disruptive enough to cause the collapse of less-stable but strategically important nations.

In the absence of action by Congress, several states have acted on their own. For instance, in California, the state’s cap-and-trade program has simultaneously reduced carbon emissions while pumping over $1 billion into the economy, generating a net increase in jobs and economic activity. While other states have considered pricing carbon, it is infinitely better for us to set the price at the federal level. Carbon pollution is a national and international concern that transcends state borders.

I do not mean to suggest that pricing carbon is a simple issue. Even if we get past the question of whether a price on carbon is necessary, there are strong differences of opinion on what that price should be and how its revenues would be used.

Unfortunately, Congress missed an opportunity to resolve those issues and to include a carbon fee in the tax reform bill President Trump signed into law last December. The next chance for a conversation on this important issue is during this year’s congressional campaigns.

Yet, due to the stigma associated with the mere idea of a new tax, we may find that few candidates will talk about carbon pricing unless they are prompted. It will be up to the media and voters, including us in Colorado, to make sure that the need for a federal price on carbon is an important and visible issue in this year’s elections.

Bill Ritter Jr., former governor of Colorado, is the director of the Center for the New Energy Economy at Colorado State University.