Washington has been navigating mostly uncharted waters since the state became one of the first in the country to legalize recreational marijuana. The prospect of legalization has been sweetened by the idea of new tax...
- What's Your Household's Cap-and-Trade Tax Burden?
What's Your Household's Cap-and-Trade Tax Burden?
Tax Foundation Calculator Helps Individuals Estimate Annual Household Costs of a Proposed U.S. Cap-and-Trade System
Washington, DC, June 4, 2009 - Americans can now estimate how much a U.S. cap-and-trade system would cost their individual households annually with the Tax Foundation's new Household Cap-and-Trade Burden Calculator. The calculator can be found at http://www.taxfoundation.org/capandtrade.
The calculator is based upon a study released in March, Tax Foundation Working Paper No. 6, "Who Pays for Climate Policy? New Estimates of the Household Burden and Economic Impact of a U.S. Cap-and-Trade System." The study shows that a cap-and-trade system designed to reduce greenhouse gas emissions by 15 percent would place an annual burden of $144.8 billion on American households. The average annual household burden would be $1,218, which would be approximately 2% of the average household income.
Although carbon emission permits under a cap-and-trade system would be purchased first by energy companies, the costs are ultimately paid by American consumers. The calculator asks how much a household's combined monthly income is (pre-tax) and how much a household spends monthly on various items like electricity, natural gas, food, clothing and transportation. It then calculates the total annual additional cost that cap-and-trade would impose on that household as well as the cap-and-trade burden as a percentage of income.
Tax Foundation adjunct scholar Andrew Chamberlain, author of the working paper, emphasizes the importance of the calculator as a way to show Americans that cap-and-trade would not represent a "tax free" way to reduce greenhouse gas emissions.
"The purpose of the calculator is to bring to light the hidden tax burden that a cap-and-trade system would impose on American households," says Chamberlain. "This is because a cap-and-trade system offers lawmakers a way to curb greenhouse gas emissions through regulations rather than tax increases—a less visible approach that enjoys the popular perception of being less burdensome to households."
Working Paper No. 6 can be found at http://www.taxfoundation.org/legacy/show/24472.html.
The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.
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