The Green War on the Poor

By Dr. Robert Zunrin
http://www.nationalreview.com
August 30, 2012

In a nearly full-page op-ed appearing in the business section of the August 25 New York Times, Cornell professor Robert H. Frank lays out the new green agenda for tax policy.

According to Professor Frank, stopping global warming may require carbon taxes of about $300 per ton of carbon dioxide emitted, and by implementing such taxes, we can also balance the federal budget. “If such a tax were phased in,” Frank says, “the prices of goods would rise gradually in proportion to the amount of carbon dioxide their production or use entailed. The price of gasoline, for example, would slowly rise by somewhat less than $3 per gallon. Motorists in many countries already pay that much more than Americans do, and they seem to have adapted by driving substantially more efficient vehicles. . . . many budget experts agree that federal budgets simply can’t be balanced with spending cuts alone. We’ll also need substantial additional revenue, most of which could be generated by a carbon tax.”
In addition to increasing the cost of American goods through carbon taxes, Frank recommends jacking up the price of imports through carbon tariffs, and he suggests that the U.S. government use such tariffs to force other nations to impose carbon taxes on their own citizens. “Some people argue that a carbon tax would do little good unless it were also adopted by China and other big polluters,” Frank says. “It’s a fair point. But access to the American market is a potent bargaining chip. The United States could seek approval to tax imported goods in proportion to their carbon dioxide emissions if exporting countries failed to enact carbon taxes at home.”

Let us consider the effects of this policy. A ton of carbon dioxide contains 248 kilograms of carbon, so a tax of $300 per ton of CO₂ would be equivalent to taxing carbon at a rate of $1.21 per kg. Since there are about 2.5 kg of carbon in a gallon of gasoline, this would increase the cost of a gallon of gas by $3.02 per gallon, or just a little more than Frank says. The average American driver uses about 730 gallons of gasoline per year, so this tax would represent a cost of about $2,200 per driver. This would be a serious hit for the average American worker, whose before-tax income is about $45,000 per year, and devastating to those making less than this. But let us consider  the effects on the economy as a whole.

The United States economy currently uses about 2.3 trillion kilograms of carbon per year, comprising 1 trillion kg in its coal, 0.8 trillion kg in its oil, and 0.5 trillion kg in its natural gas. Taxing this at Frank’s recommended rate of $1.21 per kg would therefore raise $2.78 trillion, somewhat more than the $2.3 trillion that the federal government raises through the current tax system (assuming that the carbon tax did not crash the economy, which it probably would, but we’ll leave that aside for now).

But what would the effect on prices be? Currently, western bituminous low-sulfur coal has a cost of $0.01 per kg at the mine, or $0.03 delivered to most users. Coal is about 90 percent carbon by weight. The green tax would thus multiply the cost of coal by nearly a factor of 40. A thousand cubic feet of natural gas contains about 18 kg of carbon. Taxing its carbon at a rate of $1.21 per kg would thus increase the price of a thousand cubic feet of natural gas from its current level of $2.50 to about $24.30, a tenfold increase. A barrel of oil contains about 110 kg of carbon. The green tax would thus hike the price Americans pay for oil by $133 per barrel over the world price (i.e., to about $230 per barrel today). As coal and natural gas provide the energy to produce not only the bulk of the nation’s electric power, but also most of its steel, aluminum, fertilizer, pesticides, food, plastics, electronics, glass, and many other products, and as oil provides the fuel to transport them, the cost of all of these would soar as well.

So who ends up paying? Under America’s current tax system, the top 5 percent of income earners pay 59 percent of all federal income taxes, the next 45 percent pay 39 percent, and the bottom half pays next to nothing. But because basic commodities such as food, electricity, and fuel are bought in similar amounts per capita regardless of income (i.e., a working-class family living on $30,000 per year in Harlem uses about the same amount of electricity and food as the family of a money manager living on $30 million per year on Park Avenue; and rural Americans, of whatever class, spend much more on gasoline than either), the $2.78 trillion green tax would be spread nearly evenly on all Americans, not as a fixed “flat tax” percentage of income, but as a fixed cost regardless of income.
Divided evenly among 300 million Americans, the green tax works out to a burden of $9,270 imposed on every man, woman, and child. While this would be a pittance for the most affluent Americans, it would take away 40 percent of the total income of a family of four supported by twowage earners making the average U.S. salary of $45,000 each, and it would be a virtually fatal burden for the poor.

The Obama campaign is currently banging the class-warfare drum, demanding that taxes on those making over $250,000 a year be raised by about 4 percent. Assuming no ill effects on the economy, this measure would raise $80 billion in revenue for the federal government, which conceivably might use as much as half of it, or $40 billion, in various programs that transfer part of their funds to lower-income people. “He pays less. You pay more,” say the president’s ads, promising largesse to the masses from the pockets of the rich. At the same time, however, green ideologues on whose ideas Obama’s energy policies are based are putting forth a proposal that would double the tax burden on the lower-earning 95 percent of the American public, with the poorest 50 percent being hit for a full $1.3 trillion of the increase.

But that’s not all. Because the green tax targets carbon, rather than income, it would act as a dirigiste economic policy favoring businesses that make money trading in paper instruments over those that produce real value through industry, agriculture, transport, mining, and construction. This would impoverish society overall, once again hurting the vulnerable the most, and would destroy tens of millions of blue-collar jobs.

Was ever a more regressive tax policy proposed? And has anyone ever demanded that the United States launch a trade war to force other countries to impose such oppressive policies on their own people, most of whom can afford them even less? There was a time when the Democratic party concerned itself with the needs of poor and working people. Alas, those times are past.

The green tax plan is a declaration of war on the poor.

— Dr. Robert Zubrin is president of Pioneer Astronautics, a fellow with the Center for Security Policy, and the author of Energy Victory: Winning the War on Terror by Breaking Free of Oil. His latest book, Merchants of Despair: Radical Environmentalists, Criminal Pseudo-Scientists, and the Fatal Cult of Antihumanism, was recently published by Encounter Books.