Cap-and-Trade Tax Hike Will Slam Missouri May 26th, 2009 By Carl Bearden and Phil Kerpen The surprise revenue source to pay for much of the Obama budget is something known deceptively as “climate revenues,” also known as “cap-and-trade.” What cap-and-trade really means is tax-and-spend at an unprecedented level and with sweeping consequences throughout the economy, both nationally and here in Missouri. It’s the worst kind of tax hike - a hidden tax hike, hidden behind a complex regulatory scheme that only adds to the cost. The size of the tax is a mystery. Companies know they have to pay a tax, but nobody knows what the tax rate is because companies will be forced to bid at auction for the government to allow it to use fossil fuels. The Obama budget initially slated the cap-and-trade tax to generate approximately $646 billion in revenue to the federal government over 8 years. More recently however, the deputy director for the White House National Economic Council, Jason Furman, reported that the tax scheme would actually raise two to three times that much, running upwards of $1.3 to $1.9 trillion. The truth is nobody knows how much this will cost, and that’s part of the problem. We do know the impact on our economy here in Missouri would be staggering. An analysis conducted by the highly-respected forecasting firm SAIC and commissioned by the American Council on Capital Formation projected the economic impact of last year’s version of cap-and-trade for Missouri. They found that by 2020, with the bill in effect just 8 years, we would have: 23,000 to 34,000 fewer jobs, $900 to $2,800 in lower annual disposable income per household, an annual hit to Missouri economy of between $2.7 billion and $3.7 billion, and much higher energy prices - 21 percent to 67 percent higher for gasoline and 31 percent to 39 percent higher for electricity. The study also found that lower-income families - people who are least able to absorb higher energy costs - will be the hardest hit. Those numbers are the impact of last year’s Lieberman-Warner version. We don’t have number yet on Obama’s new proposal, but it is more extreme and would be even more expensive. These astonishing economic costs are not an unfortunate side effect of the bill - they are its intended purpose. President Obama himself explained that passing costs on to consumers is an important part of his plan when he explained to the San Francisco Chronicle last year: “Under my plan of a cap and trade system, electricity rates would necessarily skyrocket… whatever the plants were, whatever the industry was, they would have to retrofit their operations. That will cost money. They will pass that money on to consumers.” What makes these costs even worse is that they don’t buy us anything of value on the environmental side. Cap-and-trade is already failing to reduce emissions in Europe. And even if emissions targets are met, climate models show that the reductions would have no discernible effect on global average temperature. The National Center for Atmospheric Research found that the Kyoto Protocol would reduce global average temperature 0.07 degrees Celsius in 50 years and 0.15 degrees Celsius in 100 years. Feel good symbolism is not worth trillions of dollars in higher energy taxes. Climate change can only be effectively addressed with the luxury of wealth that a free-market provides. That’s why it would be such a mistake to impose a cap-and-trade, tax-and-spend scheme that would only undermine our prosperity. This will ultimately be decided in the U.S. Senate, and we can only hope that Sen. Claire McCaskill ultimately decides to vote “no” on cap-and-trade. The health of our state and national economies may depend on it. Carl Bearden is Missouri state director and Phil Kerpen is national director of policy for Americans for Prosperity.
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