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'Cap and Trade' Is Really a Tax

Written by Warren Mass on March 25 2009.

Why is cap-and-trade a regressive tax? Semmens cites none other than Peter Orszag, Mr. Obama's budget director, who has estimated the price hikes from a 15-percent cut in emissions would cost the average household in the bottom-income quintile about 3.3 percent of its after-tax income every year. That's about $680, not including the costs of reduced employment and output. The three middle quintiles would see their paychecks cut between $880 and $1,500, or 2.9 to 2.7 percent of income. The rich would pay only 1.7 percent.

As Mr. Semmens summarizes the plan:

Cap and trade, in other words, is a scheme to redistribute income and wealth - but in a very curious way. It takes from the working class and gives to the affluent; takes from Miami, Ohio, and gives to Miami, Florida; and takes from an industrial America that is already struggling and gives to rich Silicon Valley and Wall Street "green tech" investors who know how to leverage the political class.

U.S. Representative Marsha Blackburn (R.-Tenn.) has said that Obama's "cap and trade," which she calls "cap and tax," would cost each household $1300 in new energy taxes. However, the Obama administration's FY2010 budget overview includes a provision for rebating hundreds of billions of dollars raised through cap-and-trade programs back to low- and middle-income citizens, amounting to $400 per year for individuals and $800 for couples. The bottom line: Obama's "cap and trade" proposal would amount to a huge new tax on energy. Then, Congress would have the power to choose certain segments of the population to favor with rebates to soften the blow of the cap-and-trade energy tax, but other segments of the population and most businesses would bear the full effect of the new energy tax.

One particularly prominent proposal for legislation mandating cap-and-trade plans was announced in October 2008 by Representatives John Dingell and Rick Boucher in draft form as the Dingell-Boucher Cap-and-Trade Bill with the intent to introduce such a bill in the 111th Congress. Their draft proposal sought to amend the Clean Air Act to mandate a reduction in "greenhouse gas emissions 6 percent below 2005 levels by 2020, 44 percent below 2005 levels by 2030 and 80 percent below 2005 levels by 2050.

A similar cap-and-trade measure, the Lieberman-Warner Climate Security Act of 2007, was introduced in the 110th Congress by Senators Joseph Lieberman and John Warner. The act allowed companies to trade, save, and borrow emission allowances, and to generate credits. This legislative proposal also mandated stringent reductions in gases, by as much as 63 percent below the 2005 level in 2050.

While neither of the above bills has been reintroduced in this Congress as we write, the anticipation of cap-and-trade revenue in the Obama budget should be the handwriting on the wall for all concerned about this new tax-in-disguise.

Click here to urge your representative to vote no on any cap-and-trade legislation. Cap-and-trade legislation is designed to impose an unnecessary tax geared to solve an unproven problem.
 

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