Carbon Tax: A Tool to Create Economic Growth
What would happen if we decided to tax the burning of fossil fuels–gasoline, natural gas, coal–and gave back the money to businesses and individuals as rebates on their income taxes?
Would you believe that it would stimulate economic growth while reducing carbon emissions? According to a new study authored by ex-Oregon state economist, Tom Potowsky of the Northwest Economic Research Center, applying a carbon tax in the way that British Columbia has done since 2008 would add thousands of jobs in Oregon.
Known as a Tax Shift (an idea promoted by Alan Durning of Sightline way back in 1998), revenues raised by an initial $30 a ton charge on carbon would go right back into the economy through income tax rebates: in effect, taxing a “bad” and not taxing a “good.” In particular, businesses would be rewarded for making more money–selling more stuff and hiring more people, which leads to a substantial uptick in jobs. All except in the transportation sector where energy use is directly tied to operations. Of course, as I’ve argued here, transportation, like pollution, is a cost to the economy rather than a plus.
A major issue will be the inequitable impacts of a regressive tax like this. Lower income people spend much higher percentages of their incomes on energy than wealthier people. British Columbia deals with this with an extra rebate for low income and rural residents (in areas with poor transportation options).