Addressing the Fiscal Cliff and Climate Change Simultaneously
Posted at noon on Nov. 14, 2012
The Washington Post looks at the possibility of using a tax on fossil fuel use — a carbon tax — to make a deal on the “fiscal cliff” and the deficit more likely.
“Because it would tax fossil fuel use, the carbon tax pleases economists who want to encourage investment and discourage consumption. Climate activists hope it would reduce greenhouse-gas emissions by penalizing the use of coal, oil and natural gas. And for lawmakers opposed to any change in tax rates or deep cuts in spending, the carbon tax could be a lifeline.”
Dylan Matthews looks at a few studies showing that a carbon tax wouldn’t make a big difference: “In 2015, a 100 percent swap would only allow income tax rates to fall 0.59 percentage points, relative to all the Bush tax cuts expiring. So the top rate would be 39 percent rather than 39.6 percent. That’s hardly a game-changer. The possible income tax cuts are barely perceptible when only half of revenue funds rate reductions.”
