Cap-and-Trade and Other Revenue Raisers

March 2, 2009

Jonathan Slemrod takes a closer look at some of the trends in the proposed budget released by President Obama:

To start, the budget relies on tax hikes on those making more than $250,000 to fund the $3.55 trillion in spending. By rolling raising rates on income, investment, and itemized deductions starting in 2011, the President is aiming to erase one of the few legacies of the Bush administration. The administration has the audacity to claim that these tax increases won’t hurt anyone because they will take effect in a few years when our economy is supposed to be recovering.

The budget also takes into account a “cap-and-trade” regime, which allows politicians to dictate energy use by setting arbitrary limits on the amount of carbon that businesses can emit. Disguised as a “market-based” mechanism, cap-and-trade is a massive new tax at a time of economic uncertainty. It would create a regulatory labyrinth to confuse even the most veteran navigators of Washington’s bureaucracy. The budget estimates that the sale of permits to pollute will bring in roughly $645 billion by 2019, laying to rest Obama’s claim that 95 percent of the country will not see their taxes increase. This $645 billion will come from the pockets of anyone that flips a light switch, drives a car, or uses a stove — in effect, everyone.

Read the rest here. Is cap-and-trade a tax? Discuss.

Other Tax Foundation blog posts on the proposed budget:

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