He has a lot of riders in his carbon tax bill, like a war tax on gasoline, and urban sprawl tax.  The carbon tax is a big deal and needs its own pillar in the sun.  Dump the riders.  Do the right thing in the face of a veto.  

...about the carbon tax -- What happens if the carbon tax is successful, even slightly, and the revenues for the Federal budget go down?  Won't painful cuts then have to be made somewhere else? Wouldn't a carbon tax be a way the Right could try to kill government off?

John writes:

Wouldn't a carbon tax be a way the Right could try to kill government off?

If that were the case, European governments -- with their high taxes on gasoline and diesel (current prices in France are around $7.50 per gallon for gasoline) -- should have disappeared long ago.

...my understanding is that the carbon tax would replace revenues from income taxes, thus making them "revenue neutral", I believe is the term.  In other words, nobody's taxes would go up if a carbon tax was instituted.  The question I had was, what happens when revenues from the carbon tax begin to fall?  do you raise the carbon tax rate?

This is why I favor a sky trust style rebate system, where all (or almost all) revenues are rebated to consumers.

This way you don't have other programs depending on revenue from a source that is extremely unpredictable and that (If it serves its purpose) will decline in the long run.  Revenue is unpredictable because for a given rate elasticity determines revenue, and as I've been learning, elasticity can be predicted only very roughly. So return revenue to the people, you compensate for regressivity, while not making any important program dependent on an uncertain source. Also, if you can communicate how it works it should lower resistance to extremely high rates if needed.

Keep it simple.  With 50 cents on gas, $50 a ton on carbon, 10% income tax on the first $100,000, 25% income tax on all above $100,000, standard deduction and personal exemptions allowed (which would make the first $39,000 income tax free for a family of four)but few other deductions.  The AMT would be gone but the revenue would be replaced by the carbon tax.  Winners would be we all be.  

Lower marginal rates would bring jobs to America while the higher cost of fossil fuels would provide incentives for countless initiatives to conserve or to substitute clean fuels.  

Both of these basic bills, carbon tax and simplified income tax are circulating through the Ways and Means Committee, after the first Christmas Tree bills run into the veto, it will be time for congress to get serious and solve several problems in one grand compromise.  emigration reform should be thrown into the mix if possible!  

Jack The Kingdom of God is at hand!

What happens when revenues from the carbon tax begin to fall? Do you raise the carbon tax rate?

The rate would need to be reasonably constant over time, and revised only in light of changes either in the estimated social cost of carbon emissions, or market in prices (e.g., linked to a three-year average).

If revenues from the carbon tax were to fall, there are other sources of government revenue that could be adjusted upwards if need be. It is unlikely that the income tax would be totally displaced by a carbon tax.

...that the income tax (or consumption tax) would have to possibly go back up a bit, or maybe a fair amount.

The whole point is that there is not some iron-clad law that links a change in the tax structure to a change in tax revenues and expenditure. Governments adjust various taxes all the time in order to obtain some revenue target.

Over half of the budget goes to medical programs such as Medicare, Medicaid, Social Security, and other federally mandated programs.  Then you have to pay for national defense, debt service, and arcane stuff like that.  The "discretionary" part of the overall budget is extremely small.  Legislators fight over the scraps usually as the "other white meat" we know as pork.  

So you can't divert taxes from from the core, non-discretionary programs or they would implode.  I suppose one could repeal all the tax cuts to the rich and apply that to global warming efforts, but is that likely or even enough money?  

I'm just trying to be realistic here.  You can't act like you have a clean slate - and you know that people will fight over money more than anything (except, apparently, the 800 billion in funny money we spent in Iraq already).  Even a small tweak to the tax code will make sheep roar like lions!  /sam

Onward through the fog

...budget politics are extremely heated.  The tax cuts for the rich have probably been spent ten times over already if you look at all the health care, education, debt-reducing, and other programs that are desperately needed, much less for global warming.  You'd have to rescind the tax cuts for the rich that Reagan got, and then bring the corporate share of the Federal budget back up from the 6% now to the over 20% it was in the 1950s.  And then there's the military budget...

>You'd have to rescind the tax cuts for the rich that Reagan got, and then bring the corporate share of the Federal budget back up from the 6% now to the over 20% it was in the 1950s.  And then there's the military budget...

Yes. Not quite all that. I would say repeal the Reagan and Carter and Nixon tax cuts. Take it back to where it was under Kennedy. Cut the Military Budget. Add a Tobin tax.  That is how you finance reasonable social programs and finance fighting global warming.

Economists have long advocated increasing the amount collected in the form of consumption taxes (a value-added tax or goods & services tax) as having the least-distorting effect on the economy. The reaction of folks in the USA to such notions is that such taxes are not progressive. Yet high VAT rates are common in many of the comparatively "socialist" countries of Europe, who long ago realized there are other ways to help the poor. The VAT in most of the EU is around 20%.

...because otherwise a carbon tax becomes very complex -- how do you actually levy the tax?  Carbon use is mostly a part of production, even in the case of wholesale and retail, it can be pretty easily tracked (trucking, etc.).  Otherwise, you'd have to have a system of refunds, etc.  Would be interesting    to figure out how to tax imports -- a carbon vat would be quite high on Chinese imports, but might be lower for German products.

I guess France just woke up, Chicago's going to sleep! A bientot.

Monbiot considers (but rejects) carbon taxes in Heat. Here's his reasoning:
In theory, you could design a tax and rebate system which ensured that money was transferred from the rich to the poor and which was constantly adjusted to maintain a steady cap on the amount of carbon the country produced. But while it would be no harder to implement than a rationing system, it would, because of the complex system of fees and rebates, be more difficult to explain. Complex ideas seldom do well in politics, as most people do not have the time or patience required to understand them.(p.44)

While I think the Brits are further ahead of us in thinking about GW, I do think it will be a while before Americans are willing to consider rationing. But it did work here in WWII, and the libertarians among us might be pleased when Monbiot writes:The market created by carbon rationing will automatically stimulate demand for low-carbon technologies, such as public transport and renewable energy. In other words, in every respect this proposal will be less statist than its competitors.(p. 47)
Of course, I think when Peak Oil breaks into public consciousness, then the arguments for carbon rationing will make much more sense.

Carbon Tax Center co-director Charlie Komanoff is, as usual, completely correct in his analysis as well as in his criticism of those environmentalists who are still looking for ways of avoiding a carbon tax, much as Nordhaus & Shellenberger are. These people are the ones Al Gore tried to reach with an "inconvenient truth": that rapid radical reductions in CO2 can be achieved only by radical increases in the price of energy. Why are so many activists ready to accept failure? Why are they trying to rationalize their opposition to higher energy costs? Why are they pretending to speak for the entire American public when they complain that 'the public" won't accept higher prices? Why are they pretending that the situation is less dire than it really is? Why are they taking the side of the naysayers, the deniers, the sceptics, and the doubters, by opposing the single most effective mechanism available to us in the remaining time frame for averting the tipping point, the point of no return? Why are these people literally SELLING OUT THE ENVIRONMENT, selling out their real friends, and aligning themselves with the ENEMIES? If there are conspiracy theorists out there, they should get busy and figure out the answers to these questions. Are they being paid by the coal industry? By the utilities? Who has bought them off? And if these are not the answers, then the only conclusion is that these people are STUPID, in which case they shouldn't be listened to any more than we listen to Bjorn Lomborg and his ilk.

Just to avoid any confusion, "Killing Me Loudly" reflects Charlie's views rather than those of the Carbon Tax Center.  As the co-director of the Carbon Tax Center, I note the following points:
 The "green establishment" that Charlie criticizes has been attacking Congressman Dingell, not the carbon tax.  It has legitimate reasons to be upset at Dingell about CAFE. In addition, I wouldn't have referred to a monolithic green establishment.
 I would not have used the "clear-cutter on crank" language, which suggests an irrational drug-crazed response.  In my view, the responses to Dingell on CAFE issues are entirely rational.
 I do agree with Charlie that Dingell has not presented the carbon tax in the most productive fashion.  Dingell has, however, done a tremendous service by adding his clout to the carbon tax legislation already proposed by Congressmen Stark, McDermott and Larson.
 I wouldn't have compared a one-time CAFE change to the questionable assumption that the Dingell ramp-up would continue indefinitely.
 I wouldn't have used the "crackpot realists" language.  We do differ with the political analysis of many cap-and-trade proponents, in part because we're convinced that a revenue-neutral carbon tax is politically feasible when compared to the effective tax that results from a cap-and-trade scheme.  
I would not have used Charlie's "dirty secret" language nor his statement that 'Big Green has an equally limitless appetite for "allies" among the corporate elite.' I accept the fact that many people for whom I have great respect currently support cap-and-trade for rational reasons, although I'm distressed that some environmentalists support a form of cap-and-trade that would give away allowances.
 I disagree with the statement that "Perhaps the environmental establishment will get its way and Congress will pass a CAFE bill while continuing to ignore the growing calls for taxing carbon."  The environmental establishment generally wants to put a price on carbon and I'm hopeful that more and more organizations will recognize that carbon taxes are the optimal approach.  The groups Charlie attacks have not attacked carbon taxes.
 Re Charlie's final point, asking "what good are mileage standards, [etc.}?  My answer would be  a lot, but not enough.  We also need a carbon tax.

It's disappointing to see Dan Rosenblum backpedalling so frantically from his colleague Charlie Komanoff's insightful and trenchant analysis. "Crackpot realist" seems exactly the right term.

I don't see how taxation will achieve particular levels of emissions cuts.  

The goal is emissions reductions- so do you set the tax at X level that roughly puts us on the desired emissions trajectory and is regularly tweaked to keep us on the right path?  Without that mechanism it seems that taxation levels may not work at all as intended as others wrote above that price elasticity re: carbon is only roughly understood.

I'm also highly skeptical that trading carbon tax revenue for income tax revenue will enable us to meet our climate goals.  If we don't pour money into R&D, weatherization programs, new mass transit, etc, we may be left with people just paying the "tax" in the form of gasoline and home heating fuels as they have no other option and the market has failed them.

Why is this debate about carbon taxes still styled by the right as a hidden agenda to increase government spending, and by the left as a hidden agenda to starve government of revenues? The question of what to tax and how much cannot of course be totally divorced from the question of the total tax burden, its incidence, and the level of government expenditure. But policy makers do have some latitude over the total fiscal envelope. Elected officials can decide, for example, to invested more government money in in R&D, weatherization or mass transit. Whether the money to pay for that comes from increased overall spending, or cuts elsewhere (e.g., in harmful subsidies in other areas) is a political choice.

In my view, it is putting the cart before the horse to condemn carbon taxes on the basis of prior assumptions that either the resulting revenues will be too much or too little. There are other ways to raise government revenues, if that is necessary, or to return some of the revenues to taxpayers, if that is desired.

I think you've been very helpful on these matters, and it's forums like this that allow us to hash these things out.  It may be the case that in order for carbon taxes to get a full hearing, they will have to be presented in the context of a full package of taxes, and even a budget, on a time-line, like 5, 10, or 20 years, so that we can figure out how they work.  What I'm getting out of this is that to talk about carbon taxes in isolation is not the way to do it.