Hi, Steve,
Thank you for the pointer to the Planet Money podcast. I haven't had time to listen to it yet but looked at the written summary on the web page, which amounted to "carbon tax + income tax reduction". We have had extensive discussions about this possibility and here's where we're currently at from a Climate XChange perspective.
First, putting a price on carbon absolutely could be done with a tax. But there are political problems with a tax. After decades of people feeling like government is ripping off their money (and, sadly, so many cases of genuine waste, of money redirected from the purpose voters approved to purposes closer to particular politicians' hearts, etc.), taxes are hard for people to sign up for. Even if the tax is small, or the overall burden is less than 40 years ago, or, or, or. In MA in particular, the Republican governor, Charlie Baker, doesn't want to be involved with a new tax.
That said, there is a legal and real difference between a tax and a fee. Although in the public mind they may all be conflated as "tax". So in MA, S.1747 proposes a fee rather than a tax. The fee is paid by the importers of fossil fuels into Massachusetts.
Now, what to do with this money? The cynical among us -- including even me -- would argue that the pot of money is too tempting. We'll start off with a discussion of all the good things we could do with this money and wind up allocating money to feel-good make-work projects. While I'm actually a person who believes that unions serve a useful purpose for their members and society, I'm not enthusiastic about diverting money to the traditional labor agenda, which appears to me to always involve dubious infrastructure projects that are required to hire union-only staff. So Climate XChange advocates -- and S.1747 implements -- a rebate program that returns all of the carbon fee revenue to the individuals and businesses of Massachusetts. OK, all except an administrative program overhead, which we expect to be very small (e.g., around 1% or less).
When we looked at changing the income tax rate downwards, we found that the overall impact on people was very small. It's hard to move the income tax rate downwards in a significant way when the money we're talking about here is small relative to the overall economic pie in MA. I'm making these numbers up but let's say for example that today's income tax rate in MA is 5.95%; maybe we could move it down to 5.90%. That's hardly emotionally or even financially appealing.
So that means that in MA we are pairing a carbon fee with a rebate. Checks will get cut to the residents and to the businesses.
I hope this answer helps.
Also... thanks for your kind words! And thank you for supporting Climate-XChange and our Carbon Pricing Awareness Raffle!
Alan
Alan,
My original question was about the similarity between the idea described in
this Planet Money podcast which I referenced above and the Climate XChange's strategy for reducing carbon emissions. I remember when I first heard this podcast 2 years ago, I thought this seems like a great idea. I only wished that our politicians have the guts to try it in real life to see if it can actually work. I'm glad that your organization is taking the initiative to try it in MA. Anyway, I'm glad to contribute to a worthy cause. Tickets brought. Best of luck in your fundraising and this important initiative.
Steve
