John McCain's Hidden Energy Tax

National Review Online: Plan For Carbon Emissions Raises Costs With Little Benefit

(National Review Online)  This column was written by Roy Cordato.

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What do John McCain, Environmental Defense, the Natural Resources Defense Council, and the Pew Center on Climate Change have in common? They have united to support a massive new tax increase on energy - which will raise costs throughout the economy and threaten the vitality of, among others, the oil and automobile industries.

I suspect that many who would be significantly harmed by McCain’s wrongheaded tax plan - say, blue-collar workers in Michigan - have never heard of it. The Arizona senator’s position on federal tax cuts is better known. Nearly all of his opponents in the presidential campaign have criticized him for voting against both of President Bush’s tax-reduction plans. What is not widely understood is that he is currently sponsoring legislation that, in the name of fighting global warming, would dramatically raise the tax on all carbon-based fuels, including gasoline, home heating oil, coal, and to a lesser extent, natural gas.

The proposed bill, co-sponsored with Joe Lieberman, mandates an energy-rationing scheme that all economists acknowledge is equivalent to a broad-based energy tax which is similar to Bill Clinton’s 1993 BTU tax proposal. Energy would be taxed through the back door by placing a cap on the amount of carbon dioxide (CO2) that energy-producing companies can emit. It puts a legal limit on the amount of energy that can be drawn from conventional sources such as oil, coal, and natural gas.

McCain’s energy tax would kick in whenever an energy-producing company wants to expand its output above the cap. If, for example, a utility company that is bumping up against its emissions cap wants to increase its production of electricity generated from coal, oil, or natural gas, it will have to buy permission to do so by purchasing unused permits from other companies. The same would be true of an oil refiner that wants to increase its output of gasoline or home heating oil, possibly to meet new consumer demand. The purchase price of the permits is a tax, and will have the same effects as a tax on the market; it would raise the price of the energy source, i.e. coal, oil, etc., and therefore, it would likewise raise the costs of all production that relies on those sources, as well as the price of all goods and services that those production processes generate.

The EPA has estimated what the McCain energy tax would mean to consumers. Since the bill’s provisions are phased in, the full cost of the tax would not be felt for a number of years. But in a letter to Senator McCain dated July 2007, the EPA estimated that the tax will be about $.26 cents in current dollars per gallon of gasoline by 2030 and $.68 cents per gallon by 2050. For electricity, the EPA estimates that the McCain energy tax would increase individual’s electric bills by 22 percent in 2030 and 25 percent in 2050.

The effect on the economy of the McCain tax would be similar to any other broad-based tax. In the EPA’s own words:

The present value of the cumulative reduction in real GDP for the 2012-2030 period ranges from $660 billion to $2.1 trillion…the cumulative reduction in the present value of real GDP for the 2012-2050 period ranges from about $1.6 trillion to $5.2 trillion.

The real surprise is that in a Republican primary in which Senator McCain’s anti-tax credentials are in question, none of his opponents have even mentioned his advocacy of this new broad-based energy tax. I will leave it to political pundits to speculate on the reasons why. But if it is thought that the climate change benefits will be worth these significant new costs on consumers and producers - think again. Over the next 100 years, the CO2 reductions from the tax will result in a temperature change that, even its proponents concede, is so small as to be virtually undetectable by current technologies.

Higher energy costs will, among other things, raise the cost of manufacturing big-ticket items in American factories. And higher gas prices will likely raise demand for those classes of automobiles that tend to be manufactured overseas. Somehow, I think Michigan voters will be less than thrilled about this, should anyone bother to inform them.

[happypappy19]

He can call his immigration bill anything he wants but this McCain''s record speaks for itself. He is for amnesty for the illegals and keeping the borders open. What did He ever do in the Senate to close down the borders? Absolutely nothing. He is for amnesty. He has never ran a state, a county, not even a grocery store. Anyone can cast votes in the Senate. that is basically what they are there professional politicians who cast votes on issues. He does little more in the Senate but cast votes and almost always his votes are against conservatives. Mitt Romney on the other hand has spent his life in starting companies and turning companies around. He is both a Harvard Law school and Harvard Business School graduate. He turned companies like Staples, and Domoninoe''s Pizza around and made them successful. He founded and turned Bain Capital into a multi Billion dollar company and took the Salt Lake Olympics that was like $300,000,000 in the red and made it one of the most successful Olympics ever with over a $50,000,000 dollar Profit. He as Governor never raised taxes but raised fees by closing loopholes that wealthy corporations where abusing. He was very popular both with The Republicans and The Democrats. . Mitt Romney also masterminded and passed a Private not public health care based system for all the citizens of Massachusetts, The only Governor to achieve that in the entire United States.

[happypappy19]

Mr Liberal(The Rhino) McCain. Not only that whenever republicans ever needed him on board to get any bill that was important to conservaties passed he almost always votes with the democrats. This man has a history of throwing tantrums and is full of rage. I don''t blame the fits of anger on him as his time as a p.o.w. would definitely contribute to that but he does not deserve a single conservative vote and absolutely does not have the temperment to be President.

[nearl4511]

The reason there is no comment on flipping of Romney is (of course) that the NR is endorsing him.

They''re pretty good at attacking Huckabee too.

You are going to make someone mad with a change in TAX structure. Progressive income tax is probably fairest, but needs to include capital gains. However, this is not what effluent want. They want the consumption tax, and that''s what most Repubs are promoting.

The NRO and WS are not interested in a measured assessment of plus''s and minus''s in tax systems.

[jfalcon465]

Sir or Ma%u2019am.

A firm is motivated to exceed its cap when demand for the firm%u2019s product is high. To meet the demand the firm must increase production, and thus increase pollution. By buying additional permits, absolutely, the firm%u2019s costs rise. Yes, most of that cost will be passed to the demanders of the firm%u2019s good.

But who better to bear that cost? These consumers are the very ones who are requesting that the firm pollutes (by their demand for greater quantity of output). The more the consumers of the polluting good want of that good, the greater the price they must pay to receive the polluting good.

This article offers nothing at all as a tool to reduce pollution. There is no option to reduce pollution that does not raise costs. However, most of us realize that pollution cannot simply be accepted at any level. The plan this author describes gives firms incentive not only to reduce pollution, but also to develop cleaner ways to produce their good. THE APPROACH DESCRIBED IN THIS ARTICLE IS THE SINGLE-MOST CONSERVATIVE APPROACH TO THE PROBLEM OF POLLUTION.

I looked at nationalreview.com for the piece that this article implicitly summarizes. There is nothing like this presently listed on the front-page. Either this article is politically timed or the author has referenced an article with some stretches from the original article. The reader should consider the honesty of either approach this author has used. I find this deceptive.

[Netterz]

This ''journalist'' is an IDIOT, if he assumes his rants&raves have ill effects on my home, MICHIGAN. Facts, we ar currently ahead of all other states on building ethanol plants, very few homes rely on coal or oil to heat homes here. Propane an wood in the north, and natural and wood in the southern part f the state is the norm. WHO this bill is going to hit the hardest? The BIG OIL co''s, in TX, who we here in MI could care less about, they only **** us off, while we ae losing our homes an jobs, there pocketing TRILIONS IN PROFITS,off the American People. Yes, we are an auto industry state, still are, andfor a long time to come,will be, because ALL the auto industries are building cars that require alot less, little, or NO OIL OR GAS. The ONLY reason they have moved some of the plants, is Gv Granholm taxed, a financially ran them out of the state, along with millions of other ppl. Only reason shes been re-elected, is her promise to keep the welfare rats housed and fed.

[sanfelz]

Take shots at McCain''s fiscal policies if you want, but why is there no mention of Romney''s hypocritical promises in Michigan?

Romney promises to fight for every job in his native state, yet as a finanacier, and a favorite of Wall Street, he has invested in and supported those corporations that have outsourced both jobs and resources.

At least NRO has not accused McCain of having an illegitimate black child. Not yet anyhow.

[anguswillys]

Oh, yet another tax from the RINO(Republican in name only). He claims to be a Republican and says he is all about straight talk, yet how many people in NH did he tell he was author of the McCain/Kennedy amnesty bill which got defeated thanks to talk radio listeners. He said recently in one of the debates that he fly jets for the US Navy not for profit but pariotism. Was his amnesty bill patriotice? He was also one of the prime sponsors of the McCain/Feingold campaign finance reform law,along with Fred Thompson, which was supposed to reform the role of meoney in politics. In the past he opposed the Bush tax cuts which restored our economy after the dot com bust and has kept it chugging along. He has also time again supported gun control measures such as the disfunctional Brady Bill. It is no surprise that this self professed military brat who has lived most of his adult life on the government dole or his wife''s inheritance would propose a tax hurting the majority of Americans. Maybe he should be called the Ho Chi Minh candidate.