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Analysis: Four big problems with a carbon tax

By Amy Harder

In the movie The Secret Life of Pets, there’s a part where two dogs are in dire straits, running away from a pack of angry dogs and lost in New York City’s sewage pipes. One dog says to the other, “We’ve got a problem.” The other responds: “We have so many problems. Which one do you mean at this moment?”

That’s how I see things with a carbon tax, despite many economists insisting it’s the best, simplest way to combat climate change. There’s four big problems, as I explained at the Brookings Institution Tuesday:

  1. Most Republicans elected officials don’t publicly say climate change is a problem in need of solutions. It’s harder to tax something you don’t acknowledge is something that needs to be reduced.
  2. Regardless of party, taxes are toxic. Hillary Clinton didn’t support a carbon tax either. With universal GOP support and a handful of Democrats, the House approved a resolution in June 2016 to oppose a carbon tax. While symbolic, the vote nonetheless shows how politically toxic this remains.
  3. Where to draw the line preempting existing carbon regulations: where ExxonMobil draws that line is vastly different from where any environmental group ever would.
  4. How to spend the revenue raised: Lower other taxes? Give rebates to consumers? Put it toward clean-energy sources? Fossil fuel companies? It’s a sticking point that helped lead to the downfall of a carbon tax ballot initiative in Washington state last year.

For now, the biggest problems in this Washington are the first two. When I ask Republican and conservative sources whether they’d prefer a carbon tax or a border tax as a way to raise money in tax reform, they don’t have an answer. And I think ultimately the answer will be neither (for now).

Go deeper: Environmental think tank Resources for the Future just launched a handy carbon tax calculator. For example, a $40 carbon tax would increase gasoline prices on average by 36 cents.