A national energy tax, which masks as a cap-and-trade program, could produce a substantial public backlash. According to a recent CNN poll, a majority of Americans already believe that such a job-killing energy tax that produces little or no environmental gain is not a good idea. This is not the first time our nation’s policymakers have toyed with an unpopular energy tax, though.
Rewind to 1993. With a large majority and emboldened by the election of President Bill Clinton, House Democrats advocated and passed (barely) a national energy tax known as the BTU tax. The goal was to tax certain energy sources based on the unit of energy production known as the British Thermal Unit. The thin margin of victory accurately reflected the reluctance of many policymakers to proceed with such a misguided policy. The Senate’s refusal to even consider the bill only served to highlight the unpopular nature of the tax.
Bring it back to 2009. House Energy and Commerce Chairman Henry Waxman (D-CA) is pushing for an aggressive national energy tax that has many of his Democratic colleagues quite anxious. These concerns are not new but Chairman Waxman is adamant about pushing his bill forward to meet his self-imposed Memorial Day deadline, House Democrats have sincere concerns over the current structure of the Waxman-Markey cap and trade bill. Congressman Jim Matheson, “sees several ways this bill could result in a huge ‘income transfer’ from his state to those less fossil-fuel dependent.”
In fact, after weeks of behind-closed-doors negotiations, it’s evident the cap and trade debate has evolved into exactly that. From the New York Times:
“Cap and trade, by contrast, is almost perfectly designed for the buying and selling of political support through the granting of valuable emissions permits to favor specific industries and even specific Congressional districts. That is precisely what is taking place now in the House Energy and Commerce Committee, which has used such concessions to patch together a Democratic majority to pass a far-reaching bill to regulate carbon emissions through a cap-and-trade plan.”
Much more on this here.
Even though policymakers tried to mitigate the near-term economic damage inflicted by a cap and trade system, special interest politics and redistributive negotiations have made a bad bill worse. Although Congress set a lower emissions cap for 2020, “the new distribution of allowances created a less efficient pattern of government expenditures and more than offset the gain from the lower cap for 2020.”
Household costs for a new energy tax will be close to $4300. Whether they fall on businesses or consumer, higher taxes reduce economic growth. Higher taxes force companies to cut costs elsewhere, typically by reducing production and therefore cutting jobs. According to The Heritage Foundation’s Center for Data Analysis’ estimate of the Waxman-Markey climate change bill, job losses resulting from cap and trade will average 1,105,000 over a 2012 to 2035 timeline. Keep in mind; these are net losses – after any “green jobs” created.
When considering the Waxman-Markey bill policymakers should remember the backlash that the 1993 BTU vote created. Any massive energy tax, especially in a recessionary environment, will be met with widespread public disapproval.