“Revenue neutral” nonsense

There are a lot of wacky schemes around for forcing people to stop using carbon-based energy, even though fire is still the basis for human civilization. The economists like carbon taxes, because in economics a tax is not a cost, just a transfer. Those who pay these taxes disagree, but no one ever said that economics is a sensible science.

The big problem with carbon taxes (other than the false underlying premise) is that they hit the poor hardest, because energy is proportionately a bigger part of poor people’s budgets. To get around this we get what are laughingly called “revenue neutral” tax schemes.

Here the “revenue neutrality” idea is that the government does not get any new revenue from the tax, because it is offset somehow. On common proposal is to reduce some other taxes. But this does not work because there is no way to match these other tax cuts with what poor people spend on energy.

Instead we get various refund schemes, one of the best known being the so-called “Carbon Fee and Dividend” proposal. This little hummer is being flogged by a group called The Citizen’s Climate Lobby (CCL), which includes James “death trains” Hansen, one of the world’s leading climate alarmists.

The deception begins with the name. The tax is called a fee and the refund is called a dividend. Giving back money you have previously taken is not a divided and a tax on something that you could get without it is not a fee.

The funny thing about these tax and refund schemes is that if they work then they fail to meet their objective. If you jack up what the poor pay for energy, but pay them the difference, then they have no reason to change their behavior.

Nor can this scheme work because there is no way to track what people pay for energy, plus how much tax they paid, and correctly calculate their refund. The administrative costs, which are subtracted from the refunds, would be astronomical. Not to mention that everyone would have to report every energy related bill or charge that they paid. It would make the income tax, which is arguably the most complex reporting system ever created, look simple.

The CCL folks acknowledge this impossibility by using a simple “average household” refund scheme. That it does not work they admit this way:

About two-thirds of households will break even or receive more than they would pay in higher prices.”

This means that fully one-third of households will receive less than they will pay in higher prices. So we can expect a lot of wealth redistribution.

Actually, given the administrative cost of collecting and redistributing the many billions of dollars envisioned in this scheme, it is not clear that anyone will benefit. Nor is this revenue stream likely to be left alone. Governments tend to want to use the money they get, rather than giving it back.

The tax itself is huge, which is what you would expect from climate alarmists out to change how people live. CCL puts it this way:

We propose an initial fee of $15/ton on the CO2 equivalent emissions of fossil fuels, escalating $10/ton/year, imposed upstream at the mine, well or port of entry.”

$15/ton is a fairly standard proposal for a carbon tax, but this is on CO2 which more than triples it. But then it grows rapidly by $10/year, which puts it over $100 in a decade, $200 in twenty years and up it keeps going. The resulting price increases would be horrendous, especially for the poor.

It is also worth noting that generally speaking the earlier a price increase occurs in the supply chain the bigger it gets by the time the consumer buys the stuff. This is because each intermediate step tends to apply a constant percentage increase.

It is not surprising that CCL looks to be run mostly by a combination of greens and politicians. Their advisory board includes a number of top alarmists. They also have an indoctrination group called Citizens’ Climate Education.

So all things considered CCL is a heavy duty lobbying group out to tax the hell out of energy. Promising to give the money more or less back is a great vote getter when it comes to carbon taxes, but it does not make them any less dangerous, maybe even more so.

The greens are out to take over and control the global energy supply and this is just one of the many ways they are trying to do it. The siren song of “revenue neutrality” is still a scam.


About the Author: David Wojick, Ph.D.

David Wojick is a journalist and policy analyst. He holds a doctorate in epistemology, specializing in the field of Mathematical Logic and Conceptual Analysis.