“Pricing Carbon” is a National Energy Tax that Will Cripple Economic Recovery

Washington, DC – Tax Day is an annual reminder to the many Americans that pay income taxes of just how much of our hard-earned money goes into the government’s pocket. But as we mark this annual “holiday,” the Institute for Energy Research would like to focus on a tax that 100 percent of Americans pay: energy taxes.

When we head to the gas station to fuel up for a family vacation or simply top off the tank to begin the work week, roughly 15 percent of what we pay goes directly to the federal and state government. The gas tax is an energy tax consumers pay directly, but we also pay indirectly for our energy when we purchase a host of other products and services. For example, everyone eats food; it’s necessary for survival. Yet many people don’t think about the fact that it takes vast amounts of energy to grow fruits, vegetables, wheat and raise livestock such as cattle, chicken, and hogs. When the price of energy increases, food prices follow suit.

Energy is the foundation of everything. Americans rely on fossil energy, that is, coal, oil and natural gas, for 85 percent of our energy needs. In addition to keeping food on the table, cars on the road and lights on at home, these energy sources are used to manufacture countless everyday goods, such as clothing, cellular telephones, computers, eye glasses, cleaning supply—the list goes on and on. So when politicians in Washington speak of “pricing carbon,” “enacting a cap-and-trade scheme on electric power generation,” or “ a carbon linkage fee,” it isn’t hard to translate. They’re talking about increasing the price of energy.

We call this an energy tax. The Los Angeles Times had a great story yesterday outlining a proposal that Senator Lindsey Graham (R-S.C.) is working on to increase the price at the pump.

Now, the logic behind increasing the price of energy through taxation is a bit cloudy. Unemployment is holding steady at just under 10 percent, gasoline and diesel prices are on the rise, and oil trading is at an eighteen-month high, so one would have to wonder why policymakers would be fighting to increase energy and gasoline taxes.

Since taking office, the Obama Administration has waged a war on coal, oil and natural gas. And while the President has dangled a few carrots in front of the coal folks in the form of billions of taxpayer dollars for a technology called “carbon capture and storage,” we point to several other instances where this administration has put policy forward to bankrupt the coal industry. Look no further than the recent Environmental Protection Agency (EPA) announcement that would make it next to impossible to obtain a permit to harvest this vital energy resource.

In the case of domestic oil and natural gas production, look no further than the Administration’s fiscal year 2011 budget proposal that would levy an additional $36.5 billion on these industries—taxes that the industry would automatically pass on to the consumer. That’s me and you. Or we could look at the litany of examples of where the Obama Administration has repealed, delayed or outright canceled oil and natural gas projects that were on the books for years, and are now in bureaucratic purgatory.

So as Americans fill their gas tanks to get to work, take the kids to their soccer game, or pick up their mail (some in rural America have to drive to their mailbox pick up their mail), keep in mind that if Washington has its way, these very basic chores will end up costing you, the consumer, more.

And when you flip that switch to turn on the lights or head to the grocery store to pick up food for the week, remember, that affordable energy, the commodity that allows Americans to live the “American Dream,” will indeed become more expensive and artificially scarce if these policies are enacted.

Happy Tax Day from the Institute for Energy Research.


April 15, 2010
Patrick Creighton: 202.621.2947
Laura Henderson: 202.621.2951

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