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Wednesday, October 26, 2016

The debate over taxes is trapped in the past. We need new revenue sources — and a carbon tax is a good place to start.

Two big points emerged from the party conventions: As the horse race became clearer; the actual policies became murkier.

Romney received no convention “bounce,” while Obama received a moderate bounce. While the bounce will go away, Governor Romney now faces a tougher uphill climb. The FiveThirtyEight blog gives President Obama an 80 percent chance of winning. The last plausible remaining chance for Mitt Romney is the debates, and maybe he can turn around that 80 percent number, but his convention speech is reasonably good evidence that he won’t.

So President Obama really will have to fashion a set of policies and a governing strategy for the next four years. And there’s the problem. Neither convention offered a shred of useful policy. The ideological core of both parties see returning to the 1950s as the direction to take. Both conventions and both parties have already rejected the idea that there actually are hard choices. I developed my own theory years ago that the more any candidate congratulated himself or herself on their willingness to make hard choices, the less they were actually willing to make any such choices.

Neither of the conventions offered up any view at all of the future beyond the election. Neither party can come to grips with real policy or choices about the future because they are both caught in a struggle to the death about, in essence, the past.

Taxes and revenue are illustrative issues. The right hates the idea of more revenue because it sees government as enemy number one (except for Russia). The left wants more revenue but wants even more to whack (via the tax code) whomever it currently dislikes. Neither side seems to care much about what ought to be the goal — equitable, sustainable growth.

Some realities about the current tax system: It is vastly and overly complex, it is inefficient, and it doesn’t raise enough revenue, which will be necessary even after you make allowances for substantial changes in today’s entitlements. But the big, hidden-in-plain-sight point is that we have reached a dead end with the income tax. The Romney tax plan, which simply assumes there is a free lunch out there somewhere, won’t happen, and would make matters worse if it did. The Obama tax plan doesn’t come close to a solution, even after you assume that the affluent pay more, as we should. We are not going to change the big deductions very much, so the base-broadening strategy won’t work. And not even Paul Ryan is willing to put out the details his budget glosses over. So we are going to need new revenue sources — and as it happens, I have a suggestion.

We should consider a carbon tax. (I have also argued that we should enact a low-level value-added tax, but that’s another day’s argument.) A carbon tax would raise substantial revenue — MIT’s recent study estimated such a tax at about $30 per ton of carbon would yield $1.2 trillion over the next decade. At the same time, a carbon tax would be the single most important step we could take to slow global warming. And now is a perfect time, as the energy revolution America is going through provides some actual pricing flexibility for a tax. We can make this change and still build a cheap energy platform for the next American economy.

Would such a tax solve our debt and deficit problems? Of course not; we are still going to have to cut the growth of spending and raise revenues. But such a tax would put a dent in the problem, make economic growth much more sustainable, and provide some lubrication for a possible bigger fiscal deal.

There is no other idea out there I know of that does these things, taxes “bads” rather than “goods,” and raises $1.2 trillion.

Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team. He has also served in senior roles in the White Houses of two Democratic Presidents. He currently chairs Resources For the Future, an economic think-tank in Washington focused on energy, climate, and the environment that is researching the carbon tax.

Cross-Posted From The Roosevelt Institute’s Next New Deal Blog

The Roosevelt Institute is a non-profit organization devoted to carrying forward the legacy and values of Franklin and Eleanor Roosevelt.

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  • Tom_D44

    This is the most ludicrous idea ever thought of. Yes let’s just price ourselves out of the global market. Make all of our products more expensive to make, distribute, sell and buy, while countries like China continue to pump out products with cheap labor from sweatshops and spew carbon into the air. Good one.

    Then we’ll let all the really rich people set up a market where they can all trade carbon credits like stocks, and make billions more on the backs of the working people. Idiots.

    • 4BusinessOnly

      Very well said Tom.

  • Pollution from carbon emission, coal, chemical dumping and other means are, indeed, destroying our environment, contribute to climate change, and affect our healths and our ecosystem, but I am not sure higher taxes is the way to go, especially when we consider that other polluters, such as China will not do the same. The key is stricter and enforceable regulation, investment in alternative energies, and changing our ways. The concept of suburbia encourages more driving, our public tansportation system are woefully inadequate, we must learn to walk or ride a bike to the grocery store near our house instead of driving a block away, we need energy efficient cars. In summary, we need to change the way we do things, and the sooner we do it the better.

  • clarenceswinney

    Here is an example in Government
    Today 5 Big Banks hold 50% of all Bank Deposits in about 7000 banks
    and 10 hold 80%.
    It goes on in Insurance. Health Care Insurers. Food. Fuel. Housing.
    Example, I had a $50,000 Life Insurance policy with one of largest insurance companies.
    I got a notice in 2010 the policy would be canceled if I did not pay $15,000 as required in the act part. State insurance commissioner said it is fraud. He got it withdrawn after my policy had been canceled. Then, to reinstate, I had to pay $1600. Fraud. How many millions got this?
    Medicare is ripped off big time by doctors, especially, and hospitals . Sleep test. Eight hours in bed, mask on face small monitor cost $5500. Three staffers work all night. If you need it at home Medicare pays. Dinner our of town. Wife blood pressure high. Two tests. Bed 9 hours-$6000.
    Obamacare has already recovered $8 Billion from overcharges in Medicare. Petty change.
    Here is part of a record in 1980s—Pentagon is filled with overcharges and bribery for contracts.
    We need a very active Justice Department.


    Attorney General—Cabinet–two OIC investigations-no charge
    Asst. Attorney General—No Charge
    Secretary of Defense—Cabinet—Pardoned
    Asst. Sec. Of Defense—Guilty–to Prison
    Secretary of Labor—Cabinet—Not Guilty
    Secretary of Interior—Cabinet—Guilty—fined
    National Security Agency–Director—-Cabinet—Guilty
    National Security Agency–Director—-Cabinet—Guilty—Pardoned
    National Security Agency—Director—Cabinet—Resigned
    Asst. Secretary of Navy—–Guilty—Fined
    Dep. Secretary of Air Force-Guilty—Fined
    Director of CIA—Cabinet—Died during investigation
    Asst. Director of CIA—Guilty—Fined
    Director of HUD—Cabinet–Pled Fifth
    Asst. Director of HUD—Guilty
    Director of Superfund—Guilty—to Prison
    Director of FAA—Guilty-Fined
    Director of NASA-Guilty—Fined
    Special Asst to President—Guilty
    Communications Director for President—Guilty
    EPA Administrator—Resigned
    Asst. Secretary of State—Guilty

    9 Cabinet Members—


    Oval Office
    Lt Colonel
    S & L
    Home loan
    Legal Services
    Civil Rights
    Product Safety
    Economic Development
    Synthetic Fuels
    Social Security
    Land Management

    Haynes Johnson book “Sleepwalking”
    “When The Pentagon Was For Sale”—Andy Pasztor—(awesome list of criminals)
    2 books titled “Scandals”
    “The Clothes Lost The Emperor”-Paul Slansky (day by day chronology of 1980’s)
    “Stealing From America”—
    “Landslide”-Jane Mayer & Doyle McManus

    Nathan Miller book states 233 were investigated
    Haynes Johnson states 138 were –charged–indicted–found guilty — investigated

    • The bammy administration is going full steam ahead 24-7-365 to make it worse. Liberals are destroying everything they touch-on purpose.

  • clarenceswinney

    14,000 Billion income cannot afford 3800B budget?
    America joins Chile(Peru?) and Mexico As Big Three
    Three lowest taxed in Oecd nations
    Our total tax in federal-state-local is 27% of GDP

  • We are overtaxed in every way. I simply cannot afford any more tax. It is time for the Government to be accountable to us and reduce their spending.

  • montanabill

    A carbon tax? Get real. Even if we could lower carbon emissions in the U.S., it would significantly reduce our competitive position in the world. Worse, it is a band-aid fix. Population growth will quickly overcome any and all attempts by the world to reduce carbon emissions. The only way to overcome the problem with a real solution is some scientific breakthrough that can sequester and manage carbon emissions on a global scale.

  • dljones

    Ridiculous! How much does it cost to sneeze.

  • onedonewong

    We need more REVENUE???? WHAT??? spending has more than doubled in 10 years. We don’t need more money we need a whole sale elimination of entire fed agencies from:
    1/2 of State and Justice
    1/3 of DHS

  • Taxes should always be for those that have pays above $50 000 a year! Then on a sliding scale. Eliminate ALL LOOP HOLES for taxes with no exceptions for those in higher brackets of taxes, have taxes on any superfluous, like automatic taxes on very expensive items(not including expensive machinery) starting at $2000 for clothes and accessories, $3000 for services, with a law that prevents corporations to pass on the cost to clients, and that includes banks (ESPECIALLY). Put a limit, a cap on possible increase of the price of petrol (which is bankrupting this country at the base, in the past and present) and tax the pollution making buying corporations, then the consumers for emissions. There are more possibilities, but I will stop there.

  • A carbon tax is just another way for the government to rob the people. It will do nothing for the enviroment.