Senators Introduce Carbon Tax
June 22, 2015
Last week, Senator Sheldon Whitehouse (D-RI) and Senator Brian Schatz (D-HI) introduced the American Opportunity Carbon Fee Act. According to the Senators, this bill aims to address concerns regarding climate change, while simultaneously improving economic performance. Specifically, this bill will impose a tax on carbon dioxide emissions.
This tax would be levied at $45/metric ton in 2016 and increase by 2% each year afterward. The tax is targeted at large emitters of greenhouse gases, such as methane, and companies that mine, extract, or import fossil fuels. Over the course of a decade, the Joint Committee on Taxation estimates the total revenue collected would surpass $2 trillion.
The senators plan to use the tax revenue in four ways. First, cut the marginal corporate income tax rate by 6%, from 35% to 29%. Second, provide workers with $500 refundable tax credit against their Social Security payroll tax. Third, increase Social Security, veterans, and disabled Americans benefits by $500, which would be adjusted for inflation going forward. Lastly, the revenue would fund block grants to states to fund programs to help workers of impacted industries transition to new jobs.
There haves been mixed reviews of a carbon tax as a policy from both the left and the right. Some see the carbon tax as an appropriate means to reduce carbon emissions and global climate change. However, others have pointed to the practical limitations of a carbon tax given that the global climate is a public good and that without other countries joining the United States, the tax’s impact on the climate would be minimal.