An Urban's Rural View

When the left and right converge on an idea, it deserves attention. The idea: Make a carbon tax the centerpiece of tax reform.

On June 28, liberal economist Laura D'Andrea Tyson described "The Myriad Benefits of a Carbon Tax" in the New York Times (http://tiny.cc/…). On June 29, conservative columnist Holman Jenkins plumped for a carbon tax in The Wall Street Journal (http://tiny.cc/…). Both, in their own ways, saw a carbon tax as key to tax reform.

(Also on June 29, the Economist, which preaches free-market economics but endorsed Barack Obama for president in both 2008 and 2012, advocated a carbon tax, though without mentioning tax reform. (http://tiny.cc/…).)

Tyson has no doubts about climate change or the "overwhelming scientific consensus" that fossil-fuel emissions are to blame. She's convinced a carbon tax is the way to address it: Set the price of emissions high enough and consumers and producers will do the rest.

"But I want to make a broader argument," she says. "A carbon tax could be an engine for tax simplification, deficit reduction, less government regulation and even increased competitiveness."

Jenkins, in the guise of rewriting President Obama's climate-change speech, feels less urgency over climate change. "I believe the increase in carbon is worrisome and the net effect is warming, but that doesn't mean I subscribe to every unfounded, dire scenario," he wishes the president would have said.

Jenkins thinks that when we need to address climate change, technology will be the answer, and a vibrant economy will be more likely to provide the needed inventions. Imposing a carbon tax while cutting payroll taxes and flattening the income tax is a way to nudge technology in the right direction while ensuring the economy's vibrancy.

By imposing a carbon tax, Jenkins has the president say, "We will have done absolutely the best thing government can do to address the risk that human greenhouse emissions will lead to dangerous climate change." At the same time, "We will not have impoverished ourselves with futile gestures."

By "futile gestures," Jenkins means the regulations on power plants and other emitters the president proposed in his actual speech, as opposed to the speech Jenkins wrote for him. Tyson isn't as hard on the regulations. She just thinks they're "second best" to a carbon tax.

The Economist, surprisingly, is the harshest, deriding the president's package of regulations and subsidies as "measures associated with Soviet-style central planning."

If we're going to have the government address climate change, a carbon tax is the simplest approach. It directly addresses the central problem by re-pricing carbon emissions to reflect their environmental costs. It doesn't require writing a lot of regulations or hiring bureaucrats to enforce them.

Tyson to the contrary, the second-best option is a cap-and-trade scheme, which would set an emissions limit but allow polluters to find the least expensive way of meeting it. Despite the opposition by some farm groups to the cap-and-trade bill Congress voted down in 2010, it would have treated at least some farmers as part of the solution.

The third-best option is what the president proposed. Its main advantage is Congress doesn't have to approve it. Today's Congress wouldn't approve any attempt to stem climate change -- even one tied to tax reform. As Jenkins has the president say, "There is no democratic appetite for giving up prosperity or our energy-rich lifestyles."

But the president's package is complicated, bureaucratic, inflexible and subject to court challenges.

It's too bad, but the notion that a different tax system and a nudge toward more environmentally friendly technologies might both make us more prosperous and help the environment isn't going to get a test in the 112th Congress.

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