Friday, March 20, 2009

Republicans Tag Cap&Trade a Tax but That’s a Good Thing

Elana Schor presents us with a letter from the Senate Republicans on the environment committee:

Specifically, the President's 2010 Budget proposal asks to collect $646 billion dollars in new "Climate Revenues" from the American people. The government will collect these new revenues through a cap and trade scheme in which " allowances" are sold to the highest bidder. The government won't tax consumers directly, but it will impose new costs on energy producers and users who will in turn pass those higher costs on to consumers, which will result in higher electricity bills, gasoline prices, grocery bills, and anything else made from conventional energy sources. In short, consumers will feel as if they are paying a new tax on energy.

While Elana appears to be critical of how these Republicans have tagged this to be a tax, the Senate Republicans are correct. But as conservative Greg Mankiw has often noted, we should place a Pigovian tax on items such as gasoline.

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