Is Cap-and-Trade the Biggest Tax in American History?

June 25, 2009

An editorial in today’s Wall Street Journal railed against the proposed cap-and-trade bill that the House will apparently be voting on Friday. The editorial closes with what seems like an outlandish statement:

Americans should know that those Members who vote for this climate bill are voting for what is likely to be the biggest tax in American history. Even Democrats can’t repeal that reality.

What does “the biggest tax in American history” mean? Is the editorial board really saying that in 15 years or so, the cap-and-trade “tax” will have a greater burden on the American public than the individual income tax (ignoring the benefits of cap-and-trade and/or government spending)? The individual income tax raises around $1 trillion in revenue, and if the average deadweight losses of that equal say 10 percent, that’s a $1.1 trillion burden. I highly doubt that the income loss to American taxpayers from cap-and-trade would exceed $1.1 trillion (even if you added in the loss to GDP which can be somewhat misleading given that GDP excludes environmental quality benefits).

The editorial cites a Heritage Foundation study which says that the bill’s cost to a typical household in 2035 would be $6,800. Considering that the individual income tax today (in 2009 dollars) has an average liability per household of $8,300 (ignoring deadweight loss), I don’t see where that claim is coming from.

It may sound good to say “biggest tax in American history,” (Drudge uses that quote when linking to the article) but it will not be the biggest tax in American history unless the individual income tax is repealed. (And it would probably require that the payroll tax be repealed too.)


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