Comments TysonSlocum has made

carbon taxes won't work

Hi! First, full disclosure - I run the energy program at Public Citizen, which Ralph Nader founded (but he hasn't been affiliated with us for two decades). I understand why Ralph is a controversial fellow, but to blame him for 2000 is unfair, to say the least. Al Gore couldn't win his home state of Tennessee - Mr. Gore deserves blame for running one of the worst campaigns in history by allowing his meek advisors to run the show and therefore silence his environmental rhetoric. Keep making great, important movies, Al, but please don't ever run for President again. And what is up with all of these political monopolists who love "competition" in the marketplace but hate it in our political system? Last time I checked, we live in a democratic republic - as far as I'm concerned, the more people/parties running to get the public's attention, the better.

Ok. Got that off my chest. Mr. Komanoff is to be applauded for initiating discussion on this important issue. Bold thinking on these issues is in short supply, and I congratulate him.

Now, a couple of quick thoughts.

First, it wasn't my impression that Ralph Nader was "perpetuating the artifice of cheap energy." He was saying that consumers aren't getting any bang for our buck. We're paying more for energy, but much of that money is simply flowing into corporate profits and stock buybacks and therefore not being invested in sustainable energy solutions. The major oil companies collectively have a trillion dollars in capital sunk into extracting, refining and marketing oil and gasoline to us. Their business model is built to squeeze every last penny of profit out of that capital investment for as long as it takes.

I wholeheartedly agree with Mr. Komanoff's desire for change in America's energy policies. But there are several key flaws with Komanoff's arguments.

Mr. Komanoff claims that "we can infer that gasoline demand is almost 10% below where it would be if we still had 2002 prices. That's because drivers have cut back in response to the higher price -- not massively, but enough to offset most of the higher demand that would have come with the expanding economy."

Mr. Komanoff doesn't provide the methodology he used to infer that gasoline demand has dropped in relation to economic and population growth. In fact, this is a surprising assertion because in nearly all analyses that I've come across, everyone concludes that gasoline demand is NOT declining in response to higher prices
http://www.msnbc.msn.com/id/14340379/
That's because gasoline demand is highly inelastic. Tens of millions of households have bought homes and cars years ago when prices were cheaper, and it is simply not a viable economic option for working families to change their consumption habits because prices have tripled. The only way for demand to drop is if prices get punitively high to cause a recession. Economic stagnation will guarantee reduced energy use. But at what cost to society? Relying on markets (prices) alone to achieve energy conservation, as Mr. Komanoff suggests, simply won't get the job done in an efficient, humanitarian manner.

So Mr. Komanoff suggests an aggressive solution: "Tax-shifting is the phasing out of existing, onerous, regressive taxes, such as state sales taxes and federal social security taxes, as the fuel taxes are phased in."

Apparently Mr. Komanoff is suggesting huge new increases on taxes on "bad" energy consumption tied with corresponding cuts in the payroll tax that currently finances social security.

Needless to say, this is indeed a bold proposal worthy of discussion. Let's discuss just a few potential problems. Let's assume that Mr. Komanoff's plan to impose huge new taxes on "bad" energy consumption achieves the desired result: consumption of oil and other bad energy declines. That means the revenue generated from taxing bad energy will decline over time. But Mr. Komanoff was replacing payroll taxes that fund social security with this new carbon tax. But how will we continue to fund social security (which has its own looming financial problems decades in the future) with a tax that, by design, will become ineffective at raising money over time? Replacing the payroll tax with a carbon tax will not generate enough revenue to finance social security. In fact, you will bankrupt social security faster than we will end our addiction to oil. Am I wrong on this point?

Also, I've come up with a saying in this era of $300 billion annual federal budget deficits: Programs for the poor will always be the first on the cutting room floor. Do we really think that Congress will continue to allocate billions of dollars every year to financial protections for the working poor from the ill-effects of high taxes on bad energy consumption? Pressure will increase to allocate more money to deficit reduction and other spending priorities. The working poor will always get the short end of the stick, and we need to be honest about this fact when designing huge new tax increases on the poor.

Regarding the poor, Mr. Komanoff makes what I believe to be an inaccurate statement: "individuals and families that use less energy than average would get back more in tax reductions or rebates than they would pay out in fuel taxes. Since most poor households drive less, fly less, live in smaller homes, and have fewer appliances and electronic devices than richer households, most of them would benefit monetarily from this tax plan -- even those that drive clunkers, have drafty houses, and own hand-me down refrigerators."

What Mr. Komanoff forgets is consumption as a share of income. Poor people are poor because they cannot save money. Why can't they save money? Because they spend all of their available income consuming everyday essentials like energy, food and rent. So it doesn't matter if a poor person drives less than Bill Gates, because Bill Gates can drive all he wants, but the price of a gallon of gas will never be a factor in his monthly family budgeting. When we tax consumption, as Mr. Komanoff proposes, that tax will disproportionally hit poorer families much harder than wealthier families. And Mr. Komanoff neglects to mention the secondary impacts of rising energy prices (as his tax would do): prices for goods and services in our economy will rise across the board.

Mr. Komanoff argues that we must use the market to change America's terrible track record on energy policy. He proposes "instilling across-the-board incentives to improve energy efficiency and creating the market pull for renewable biofuels, solar, and wind energy."

But what if instead of trying to influence the market, we force the market to comply? That's why Public Citizen supports legally-mandated renewable energy standards. Quite frankly, Public Citizen is sick of waiting around for the market to do the right thing on environmental policy. It's time that we establish aggressive, enforceable laws requiring a certain percentage of energy be derived from renewable resources. Twenty states and the District of Columbia have established such standards. It's time for an aggressive push at the federal level.

And Public Citizen strongly supports large new income taxes on oil company profits, with the proceeds dedicated to investing the billions of dollars it will take to bolster America's mass transit infrastructure and the billions it will take to invest in smart growth strategies for urban and rural living in this country. The market will never make these types of investments - government must take the lead, and we should ask the oil industry to finance the start-up costs.

And lastly, Public Citizen supports the public financing of all political campaigns. Since 2001, the oil industry has made $61 million in campaign contributions to federal candidates, with 81% of that total going to Republicans. Until we end the ability of special interests to legally bribe our elected officials, we will continue to get legislation that satisfies their corporate agenda, at the expense of citizens and the environment.

I hope that my criticism is taken as constructive. Again, I applaud Mr. Komanoff for raising such bold ideas, and my intent to respond here is to provoke debate that may result in the implementation of the strongest, soundest policy proposals.

Thanks!On Albert, Martin, and ... Ralph? Solving the real energy crisis posted 3 years, 3 months ago 26 Responses