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The “Baker-Schultz”

Carbon Tax

Named after two of its most well-known proponents, former secretaries of state James Baker and George Schultz, this carbon tax is the model for many state carbon tax proposals, including the Connecticut plans.  It was formulated by business leaders, the so-called Climate Leadership Council which can be found here (and pictured above, L. to R. are James Baker, George Schultz, and former treasury secretary Hank Paulson).  It starts with a fixed tax per ton of carbon, $40 per ton in this case, increasing the tax 2% per year.  Some of the funds collected would be returned to taxpayers in the form of a tax “dividend” and CO2 emitting industries, such as oil, gas, coal and power plants would receive extensive regulatory relief, under the assumption that the tax will cause reduced consumption of those energy products, obviating the need for Obama-era regulation of them.  This explains why even a company such as ExxonMobil has endorsed this plan – the easing of environmental regulations must far outweigh the costs of the tax for them, which is passed on to consumers anyway.

Shortcomings of the Climate Leadership Council Carbon Tax
In a study commissioned by the Institute for Energy Research here, it was found that the Baker-Schultz plan, and five other plans like it, all failed to reach their objectives.

Most significantly, the tax doesn’t work.  The Baker-Schultz plan fails to meet the Paris Agreement targets for either 2025 or 2050.  These targets are to contain global temperatures by 2050 to within 2 degrees Centigrade of pre-industrial levels, which would mean reducing carbon emissions by 2025 to 26-28% of the emissions of 2005; and to reduce them by 80% by 2050. The International Energy Agency (IEA) calculates that to reach the two-degree goal of the Paris Agreement, carbon prices in all of the developed world (not just the U.S.) would need to rise to $190/ton in 2050, which the Baker-Schultz plan falls far short of (and CT’s plan “only” imposes a $160 tax in 2050).  Even then, the IEA says that “CO2 prices alone would be insufficient to stimulate the required pace and extent of energy sector transformation and would need to be accompanied by the phase out of fossil fuel subsidies and additional fuel taxation.”

The carbon tax is highly regressive and disproportionately affects lower-income populations.  Based on an analysis of the Bureau of Labor Statistics and the Bureau of Economic Analysis, the IER study calculates that the lowest quintile (20%) of wage earners in the U.S. spends 7% of their income on energy, while the highest quintile spends only 1% on energy.  In other words, the lowest wage earners spend seven times their income on energy compared to the highest wage earners and so would be impacted more by a carbon tax, even if it is in some way rebated to them at the end of the year.

A carbon tax of the magnitude proposed by the Baker-Schultz plan at the federal level would introduce “vertical tax competition” between federal and state taxing authorities.  Ever higher federal taxes will impede the states from raising their taxes in order to balance their budgets.

The plan’s revenue recycling element, whether through tax credits or lump sum rebates, will result in a net decline of GDP equal to between $1.88-2.75 trillion in constant 2015 dollars over a 10-year period, and between $3.76-5.92 trillion over the 22-year forecast period, depending on which of the 6 scenarios being studied is used.

1o Reasons to Oppose a Carbon Tax

A “carbon tax” is a tax on energy. Through July 2015, over 80 percent of domestic energy consumption came from natural gas, oil, and coal. A carbon tax would impose an indirect tax on these fuels due to their carbon dioxide emissions. Below are ten reasons carbon taxes should be opposed:

The Truth About Carbon Taxes

The truth about Carbon Taxes an why  the French forced their government to back down.

Why not a carbon tax

A recently released 146 page “carbon pricing analysis” comes to the conclusion that making fuel unaffordable will force people to use less. Below are some more take aways from the report.

Happening Now

French people force government to back down on a carbon tax  

“Here’s what happens when government acts against the will of the people – French protesting a carbon tax near the Arc de Triomphe in Paris”