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Wednesday, March 31, 2010

The "Cap and Tax" rhetoric is even more misleading than we're giving them credit for

The Cap and Trade approach is deeply flawed, but the criticism from groups that call it "Cap and Tax" is dishonest. It's dishonest not merely because it is not literally a tax but because there is a better, more equitable, more effective, and less economically damaging approach that actually does literally involve a tax! To frame Cap and Trade as a "tax," spoken with a sneer implying that taxes are fundamentally evil, blocks off the political avenue of even considering this better solution! Check it out at carbontax.org.

Offsets are flawed. The whole idea of cap and trade is problematic and it opens the door for more crony capitalism, but it would have some positive impact compared to doing nothing. But there is no doubt that capping emissions and requiring heavy emitters to purchase offsets would increase costs for those heavy emitters. Thus, the opposition has taken to framing Cap and Trade as "Cap and Tax." How clever. How biting. How dishonest.

A tax would be better! A fairly administered revenue-neutral carbon tax is what we need. It's not about playing favorites between industries. It's simply a recognition that certain economic activity generates externalities that the market does not factor into price, and as we recognize greenhouse gas emissions as one such problem, we can put in place a revenue neutral tax. A revenue-neutral tax is simply a way for us to collectively decide that what the hidden cost for a particular activity is, tax it at a level based on our estimate of that hidden cost, and then distribute the revenue from those taxes back out to everyone equally. The result is not bigger government, but simply a market value attached to the activity that produces the externality.

I think it's brilliant. Now ... how to sell it with a catchy slogan. That's much harder than convincing a thinking person that the policy is right....

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