Maybe I’m just old-fashioned, but I don’t believe in using dodgy numbers or nonsensical analysis – even if that would help my side in a policy debate.
And it goes without saying that I also don’t like when the other side is dishonest. But I’m not talking about my left-leaning friends who have genuine (albeit misguided) views on things such as Keynesian economics or the minimum wage.
I’m talking about people who deliberately dissemble and prevaricate in hopes of advancing their policy agenda.
Consider, for instance, the new carbon tax that has been introduced by Congressmen Ted Deutch (D-FL) and Patrick Rooney (R-FL). The core features of the bill are:
- A $15-per-ton carbon tax that increases $10 each subsequent year until it reaches $100.
- A new entitlement program giving money to all legal American residents, including children.
- A new tax on consumers who buy imports from nations without similar taxes on energy usage.
- A supposed adjustment and easing of existing regulations governing carbon emissions.
There’s obviously a serious policy debate to have about both the general concept as well of the individual components of this type of legislation, and I’ve periodically added my two cents to the discussion.
But what irks me is that the sponsoring lawmakers are openly and deliberately lying about a key part of their plan. Here’s the relevant section from their talking points.
The claim about “revenue neutrality” is a stunning level of dishonesty, even by Washington standards.
At the risk of stating the obvious, if the government imposes a tax and then also creates a program to give money to people, that’s not revenue neutrality.
Was Obamacare “revenue neutral” because all the new taxes were balanced out by the handouts and subsidies that the law created for the big insurance companies?
Of course not.
And a new carbon tax doesn’t magically become “revenue neutral” because new revenues are matched by new spending.
To be sure, supporters can argue that their plan is “deficit neutral,” and that would be legitimate (even though I would argue that this wouldn’t be the case in the long run because of the adverse economic impact of new taxes and new spending).
But “revenue neutral” is a bald-faced lie.
The Daily Caller reported on this amazing example of deceptive advertising, citing the good work of Paul Blair of Americans for Tax Reform.
The bipartisan House Climate Solutions Caucus claims it is pushing a “revenue-neutral” carbon tax, but legislation proposed Thursday would hike taxes by at least $1 trillion over the next decade… Florida Reps. Ted Deutch, a Democrat, and Francis Rooney, a Republican, reintroduced a bill Thursday that would place a $15-per-ton tax on carbon emissions in 2019. The tax would rise by $10-a-year increments until it hits nearly $100 per ton. …Though Rooney claims the tax is “revenue-neutral,” the plain text of the bill does not include any reciprocal tax cuts to balance out the burden of the added tax on emissions… “Historically and for anyone engaged in tax policy, the definition of ‘revenue-neutral’ is and always has been if you increase a tax, the amount of revenue it generates must be offset by an equal tax cut elsewhere,” Blair said. …Blair said…that the “apology checks” sent as carbon dividends will be treated as new spending and do not negate a new tax burden.
By the way, just in case anyone thinks I’m imposing some weird, libertarian-ish, meaning to “revenue neutral,” you may want to look at how the left-leaning Tax Policy Center defines the term.
Revenue-neutral. A term applied to tax proposals in which provisions that raise revenues offset provisions that lose revenues so the proposal in total has no net revenue cost or increase.
I often disagree with the folks at the Tax Policy Center, but I’ve never questioned their honesty.
So when we both agree on the definition of ‘revenue neutral,” this is slam-dunk confirmation that it’s preposterously dishonest to count new spending as an offset to a tax increase.
P.S. Some of my friends and allies who supported the Fair Tax sometimes played fast and loose with the truth. That plan would have required the government to send “prebate” checks to households to partly compensate people for the new tax, yet supporters would argue that this expenditure shouldn’t count as a new entitlement program. While my first choice for tax reform is the flat tax, I certainly think a national sales tax would be a far better way to tax than the mess we have today, but that did not justify mischaracterizing the plan.
[…] P.S. Some otherwise sensible people in the U.S. are flirting with making the same mistake with energy policy. Perhaps the failure of such policies in the U.K. will teach them something (but I won’t hold my breath). […]
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A NST or FairTax would be fine if we had started with that, however, you have the problem of the “phantom tax”.
Example: John now makes $100,000 and pays $25,000 in tax. Cost of his services $100,000.
With an NST: John still makes $100,000, and for his services you must pay $25,000 tax for a total cost of $125,000; 25% inflation. The tax goes away, but stays in the cost of goods.
To make things equal, you must cut John’s gross pay to the previous net amount. Good luck cutting everybody’s pay.
In addition to the one time inflation bump, an NST would be far more complex. (How do you make sure a haircut or sandwich is taxed? Those who cheat have a competitive advantage and can offer lower price.) Where do you tax? Retail only? And, it would be a new tax for those states without sales tax. Some states might continue income tax.
The tax would be regressive. Low income people consume total income, for 100% tax, whereas high income people invest a significant portion. You would have to tax investment too, at the same rate. Is capital gain reduced by the tax cost? Dividends? Stock split?
I agree with you that fixing our existing tax is far better that a brand new tax, especially since we don’t know the unintended consequences.
However, a flat tax is a political loser. Helps the rich and hurts the poor.
A large standard deduction would make it more attractive, but in reality that would be a two tier system. Zero up to the standard deduction amount and tax after that point. Each family would still have to file annual tax forms.
A Unconditional Basic Income could be distributed separately. Those currently receiving support through safety-net program would have a dollar for dollar replacement. No additional support, but a lot more flexibility and incentive to get out of poverty. Federal welfare would be eliminated, as would the overhead costs.
The flat tax would start at zero income, meaning that withholding would be accurate, and companies could file accurate tax information, eliminating annual tax forms for those without business income.
Cost of such a program: Net zero for those on benefits; partial reduction in cost for those on partial benefits, but a net increase in pay for those that haven’t seen a pay increase in a while [no need for a minimum wage]; the wealthy pay for themselves and a little more. However, by increasing the efficiency of the tax code and eliminating about 1 million federal jobs, we have an additional 1 3/4% increase in GDP, which primary benefits the rich, so they net out close to zero from additional cost vs addition gain.
The system is extremely fair, UBI and flat tax is the same for everyone, based on family size. It is slightly more progressive, to get votes. It is extremely efficient, with the same tax for all work. Decisions will be made on the merits, not on the tax consequences. The economy will roar!
Leviathan wants. We cannot argue with it, it has to ended! It Brooks no dissension, it is anti-republic. It must be ended!
[…] Source: Carbon Tax Salesmanship: A Case Study of Political Dishonesty […]
The carbon tax is bad.
The $10 increase per ton per year is outragious.
The handout to adults and children, regardless of need is supported by a Republican – (I assume he is retireing soon).
I’d want an immediate credit to offset the tax. But I can imagine (as in pretend) the “fee and dividend” at an even lower transaction cost.
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