A carbon tax to kill Trump’s appeal

By Christopher Tidmore
Contributing Writer

The main obsession of Capitol Hill right now centers upon infrastructure, specifically whether the GOP’s $928 billion counter offer to President Biden’s $1.7 trillion compromise will result in enough common ground to pass a bill. The 25-member bipartisan U.S. House “problem solvers caucus” began working with the president last week on not only on the size of the proposal, but – more importantly – how to pay for it. The real political trick within the two parties, though, remains how to claim the credit for their side for being fiscally responsible – without doing something to enrage their respective base electorates. So far, the GOP has resisted Biden’s notion of the 15 percent corporate minimum tax. Republicans know the toxic reaction of base conservatives when their side commits to higher income taxes.

Democrats likewise resist indexing gasoline taxes to inflation, as La. Sen. Bill Cassidy suggested as a revenue solution, last week. It is an idea that Democrats once championed. Now, centrists worry about the reaction from the party’s working class minority base when faced with higher gas prices, and progressives foresee electric cars becoming more common in the next decade. If Elon Musk succeeds putting a Tesla in every driveway, higher gas taxes at the pump will actually become somewhat irrelevant. Hence, the new GOP enthusiasm for them. It’s simpler for conservatives to support a tax that effectively will tax few – if anyone – in a decade.

Politically, both sides from the president to Mitch McConnell look over their shoulders wondering what Donald Trump will spew out as he re-starts his rallies again in the coming weeks, and how his invective will influence infrastructure fight. Biden needs a strategy to counter Republican domestic tax concerns, and the GOP needs a plan that would placate Donald Trump – or at least his working class white supporters, while still offering revenue enhancement that seemingly will not alienate the suburban middle class. Both sides may have an answer thanks to a debate which broke out in Great Britain over carbon border taxes. Prime Minister Boris Johnson reportedly floated the idea to President Biden of the leading industrialized nations jointly instituting tariffs upon Third World polluters at the G-7 Summit in Cornwall, last week.

The Financial Times reported, on May 27, that Johnson had come under pressure from senior members of his own party, including his own father, to introduce a UK carbon border tax to protect British industry from cheap competition from polluting countries. Rishi Sunak, the chancellor of the Exchequer (equivalent to U.S. Treasury secretary), subsequently ordered research work to be done on the possibility of introducing a levy on carbon emissions to imported goods, which are not carbon-taxed at the source.

At the same time, Bloomberg reported that John Kerry, the U.S. envoy on climate, revealed that Biden was “interested in evaluating the border adjustment mechanism,” since the EU is also planning to introduce its own carbon tax on imports. China, though, with its continued reliance on non-renewable energy, regards the idea of a border tax on carbon as protectionist. However, that may stand as the concept’s political advantage if the idea of a carbon border tax “club” of the EU, U.S., UK, Canada, Australia and New Zealand offers a way to prod big emitters, like China, into taking faster action to cut greenhouse gases.

In fact, the EU did unveil plans in late 2019 for what it called a “carbon border adjustment mechanism,” initially targeting only a handful of products such as cement, steel, iron and some fertilizers. It is likely to hit companies in neighboring countries like Russia rather than richer states like the UK or U.S. In other words, a carbon border tax allows the United States to maintain relative free trade with her closest allies whilst raising hundreds of billions of dollars off trade from polluting “rising” rivals – creating a means to pay for the infrastructure legislation.

It’s “America First” in a way that neutralizes Donald Trump, a long-time supporter of protectionism, while at the same time keeping the environmental lobby content. Even Joe Manchin cannot complain about it. Strangely, depending upon how it’s designed, carbon taxes could hit foreign coal and oil producing nations, while having no effect on domestic exploration. Being able to drill, frack, and mine domestically while taxing those who do the same abroad would trigger a boom for domestic energy exploration industries, particularly in West Virginia and Louisiana. It’s a carbon tax which does not affect oil field workers in the Pelican State or coal miners in the Mountain State. Call it a modern version of the once sacred “sugar price supports,” which otherwise free trade La. senators like Russell Long rushed to defend for their influential farming constituencies. Slapping profitable tariffs on polluting “cheap labor” would both add to domestic industry, whilst enabling a viable political solution where Washington can tax “neither you or me, but the guy behind the tree,” to quote Long’s old quip.

Carbon border taxes stand as one of the few taxation answers where Democratic environmentalists will cheer as loudly as the GOP Caucasian industrial working class; though, the free traders in both parties would fear rising prices – not without merit.

Inflation fears loom already. What happens when retaliatory tariffs cause the price of wood to build homes to go up by a factor of four, the rare earths to build microprocessors to increase by a factor of 10, and the steel to build cars and high-rises to jump by a factor of 20? That is the consequence of tariffs, even as more people at home are able to get good-paying jobs. The poor pay the price, so the middle class can thrive.

This article originally published in the June 14, 2021 print edition of The Louisiana Weekly newspaper.