Tuesday, June 10, 2008

Carbon Tax Proposal


Recently, I included a subtle link to the following proposal by Rep. John Dingell of Michigan.

What do you think?

Summary of Draft Carbon Tax Legislation Representative John D. Dingell

The earth is getting warmer and human activities are a large part of the cause. We need to act in order to prevent a serious problem. The world’s best scientists agree we need to reduce greenhouse gas emissions by 60-80 percent by 2050 in order to limit the effects of global warming and this legislation will put us on track to do just that.

This is a massive undertaking, and it will not be easy to achieve, but we simply must accomplish this goal; our future and our children’s futures depend on it.

In order to get to this end we need to have a multi-pronged approach. In addition to an economy wide cap-and-trade program, which would mandate a cap on carbon emissions, a fee on carbon is the most effective way to curb emissions and make alternatives economically viable.

Below you will find a summary of the carbon tax legislation I am working on. I invite you to comment on the proposal. Once I have received your comments, I will look at ways we can address the ideas and concerns brought to my attention by the American people.

We must remember we all have a common goal and are in this fight together. I look forward to hearing from you.

The legislation I am proposing would impose the following:

A tax on carbon content:

  • $50 / ton of carbon (phased in over 5 years and then adjusted for inflation)
    • Coal, including lignite and peat
    • Petroleum and any petroleum product
    • Natural gas

A tax on gasoline:

  • .50/ gallon of gas, jet fuel, kerosene (petroleum based) etc…(added to current gas tax) (phased in over 5 years and then adjusted for inflation)
    • Exemption for diesel – The fuel economy benefits of diesel surpass even its emissions benefits; it provides about a thirty percent increase in fuel economy and a twenty percent emissions reduction
    • Biofuels that do not contain petroleum are exempt. Biofuels blended with petroleum are only taxed on the petroleum portion of the fuel.

**The .50 gas tax is in addition to what is derived from the per ton carbon tax in the previous bullet.

Phase out the mortgage interest deduction on large homes. These homes have contributed to increased sprawl and longer commutes. Despite new homes in and of themselves being more energy efficient, the sheer size, sprawl and commutes lead to dramatically more energy use – or to put it more simply, a larger carbon footprint.

Specifically, the proposal:

  • Phases out the mortgage interest on primary mortgages on houses over 3000 square feet.
    • Exemptions for historical homes (prior to 1900) and farm houses.
    • Exemptions for home owners who purchase carbon offsets to make home carbon neutral or own homes that are certified carbon neutral.
    • An owner would receive 85% of the mortgage interest deduction for homes 3000-3199 square feet
    • 70% for homes 3200-3399 square feet
    • 55% for homes 3400-3599 square feet
    • 40% for homes 3600-3799 square feet
    • 25 % for homes 3800-3999 square feet
    • 10% for homes 4000-4199 square feet
    • 0 for homes 4200 square feet and up

See an example of how the changes in the mortgage interest deduction would work.

Where will the revenue go?

First and foremost, the Earned Income Tax Credit will be expanded. This helps lower income families compensate for the increased taxes on fuels.

  • Expansion of the Earned Income Tax Credit
    • Zero Children:
      • max earned income level from $5,590 to $7000
      • Phase-out from $7000 to $9000
    • One Child:
      • Max earned income level from $8390 to $10,000
      • Phase-out from $15,390 to $17,000
    • Two or More:
      • Max earned income level from $11,790 to $15,000
      • Phase-out from $15,390 to $18,000

The revenue from the gas tax goes into the high way trust fund, with 40 % going to the mass transit and 60 % going to roads. The revenue from the tax on jet fuel goes into the airport and airway trust fund.

Finally, the revenue from the fee on carbon emissions will go into the following accounts:

  • Medicare and Social Security
  • Universal Healthcare (upon passage)
  • State Children’s Health Insurance Program
  • Conservation
  • Renewable Energy Research and Development
  • Low Income Home Energy Assistance Program
I'm sure Rep. Dingell would love to hear from you. Please comment if you have any strong feelings about this. Here are mine:
Name: Mr. Bruce Hall
Do you support a cap-and-trade system? NO to cap-and-trade
Do you approve of the idea of a carbon tax? NO to carbon tax
The 1960s and 1970s were the beginning of a new ice age and then the naturally occurring climate oscillations moved to the warm side. Then the 1990s became the Global Warming age and we were going to be flooded with rising oceans. Now it is becoming painfully obvious to those who actually follow the data that we are beginning a cooling phase... one that started at least 5 years ago.
This despite obvious attempts to restate the historical temperatures:
Actually, the climate has cooled since the 1930s.
While I must presume sincere concern for the climate on your part, I must also conclude that your schedule precludes actually reading much about it. This proposed legislation is no more than a massive tax and income redistribution scheme that even the Soviets would have blushed to propose. Rather than move outside your area of expertise, you should be focusing on the onerous legislation that is killing the domestic auto industry.


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Cost of Gasoline - Enter Your Zipcode or Click on Map

CO2 Cap and Trade

There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
It was beautiful and simple, as truly great swindles are.
- O. Henry
... The Government is on course for an embarrassing showdown with the European Union, business groups and environmental charities after refusing to guarantee that billions of pounds of revenue it stands to earn from carbon-permit trading will be spent on combating climate change.
The Independent (UK)

Tracking Interest Rates

Tracking Interest Rates


SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)