Sweeten the Carbon Deal by billferree

Idea of budget neutrality is appealing - and may provide some practical framing for making this work. It is unclear why author needs three proposals. The original idea was to offer a dramatic stimulative tax cut that would take the spotlight off of the carbon tax part of the package. $50/ton was originally chosen because it is a frequently mentioned number for achieving 80% emission reductions by 2050. Adding in a financial transactions tax and removing the cap on wages subject to the Social Security tax served to close a shortfall between the $50/ton revenue and the proposed $333 billion cut. These two items and the payroll tax cut also address what the author believes is a serious economic and social problem, historically high income and wealth inequality in this country. The numbers worked nicely too. Remember 5 and you have most of it. 5% reduction in the labor cost component, 5¢ increase in the cost of coal generated electricity, $50/ton of CO2 and 50¢ onto a gallon of gasoline. With a little bit of manipulation even the transactions tax and cap removal could probably be expressed pretty closely with just 2s and 5s. Goal: easy to remember. It might be simpler to ONLY offset the carbon tax with FICA cuts. The author agrees and admits to being a little nervous that the whole thing was too complex. Too much for the 30 sec. elevator speech or to fit into 140 characters. The proposal has been revised so that it has just two simple items, Cut payroll tax rates by a third and offset the revenue loss with a $60/ton tax on CO2. We would question too as to why FICA is chosen instead of other tax breaks that might be offered. The author believes acceptance of a tax on carbon will require widespread recognition of a matching returned benefit. There is great skepticism of trickle-down effects. People are much more likely to be on board if money taken at the gas pump comes back directly in the paycheck. The author believes too that the evidence of continued slack in the economy and stagnant wages suggest putting the money nearer the bottom of the food chain will have the greatest benefit. The FICA tax cut is also very business friendly. This is a 5% reduction in the labor cost line item of a company’s operating budget. That would be a significant improvement in competitive advantage on world markets. It is also unclear why revenues go to Social Security and Medicare. Revenues must go to Social Security and Medicare to fill the massive hole created by cutting FICA rates by a third. The proposal may indeed be more political viability with a fund to general revenues. The greatest viability with the general public will be achieved if the funds flow back directly to the general public. The author agrees with the idea that the plan should be revenue neutral. The budget for the project does seem a bit low though. The state idea may be worth thinking through more carefully. The author agrees. The look of the state lobbying effort would evolve depending on the funding available. The Alt 1 project should not be especially expensive though, because it is very targeted. The goal is to influence a limited number of on-the-fence legislators in a limited number of states. The author believes that in many cases it may require not much more than just being there to offer an alternative narrative to the one pushed by power-company and fossil-fuel-company lobbyists. It seems as though this is a proposal for a $ 50 per ton of CO2 tax (though we need clarity on how and where the tax is levied, presumably on fuel) with funds returned to salaried employees through a 1/3 reduction in the SS/medicare tax (just employee share, or employer too?)and remove altogether the cap on the tax (please estimate income here). The author believes the CO2 tax should be levied as far upstream as is practicable. Imported goods might have the tax collected at port of entry. Both employee and employer would have their contribution cut by 1/3. Elimination of the Social Security tax cap has been removed from the proposal. Some other taxes (financial transactions) are thrown in. The financial transactions tax has been removed. This seems a very narrow way to 'dividend' since salaried employees who pay social security tax misses a huge swath of low and middle income families. A very large majority of households do pay FICA taxes . In the case of very low income households that pay no payroll taxes, a different vehicle for returning a share of the carbon tax collected may be necessary, an adder onto SNAP, for example. This would likely be a fairly small number because generally, poor people don’t use as much energy. The impact of this project has been nicely characterized and would be significant.