“This isn’t an olive branch; it’s an olive limb,” explains former congressman Bob Inglis (R-S.C.), describing how pending carbon tax legislation might appeal to Republicans. The limb in question is a 4 percentage point reduction in corporate taxes across the board, one of the key functions of the American Opportunity Carbon Fee Act (PDF), introduced by Sens. Sheldon Whitehouse (D-R.I.), an “undeniable,” liberal and Brian Schatz, (D-Hawaii). Inglis and Sheldon are pounding the pavement together to build support for the bill.
It’s quite unusual for Democrats to propose a corporate tax break, but these politicians believe this olive limb is the key to gaining bipartisan support for their initiative. They just might be on to something.
The goal of the bill is to starkly lower corporate carbon emissions — fast. Independent analysis shows that it would reduce these emissions by an impressive 40 percent compared to 2005 levels by 2025.
The bill is structured to be revenue-neutral (meaning money collected from the tax is returned to the people) and border-adjusted (to level the playing field for trade-vulnerable, energy-intensive domestic companies). Here are its key components:
- A $45 per ton tax on carbon emitted beginning in 2016, with an annual increase of 2 percent, “ensuring emitters would be held responsible for the harm they offload on the American people,” explains Whitehouse in a summary sheet of the bill.
- Reduce top marginal corporate income tax rate from 35 percent to 29 percent
- Offer Americans an inflation-adjusted $500 tax credit
- Provide a fund for state-directed use to support low-income and rural households and workers transitioning to new industries
The tax would be applied upstream to fossil fuels at the point of mining or extraction (coal and oil companies), large emitters of non-fossil fuel based greenhouse gases (like cement producers), and on producers and importers of industrial gasses (like refrigerants). While this would increase the cost of goods, prices at the pump and electricity costs, it would provide a price signal to incentivize the efficiency and innovation that we need to get off fossils fast.
The bill still has a long ways to go to get mass appeal, but Inglis is working hard to build support for it among Republicans.
The duo believe that many Republicans want to support carbon mitigation legislation but fear the wrath of the fossil fuel industry, which has gotten too much power since Citizens United allows it — and every other corporate sector — to spend unlimited funds to influence elections. Companies with oil and gas interests spent more than $70 million on federal candidates in the 2012 election, almost double what they spent in 2012. Ninety percent of that went to support Republican candidates. This spending represents a massive roadblock for anyone wanting to gain Republican support for carbon legislation.
The carbon tax presents Republicans with “safe passage through the political minefield — the shelling — they anticipate from the fossil fuel industry,” Whitehouse explains. But they also need support from small business owners in their constituencies.
Finally, the carbon tax provides a gentle way out of an economic predicament faced by fossil fuel companies. Stocks are falling, assets are stranded and Goldman Sachs says peak coal is here. “If you are a coal miner, this is your chance to get your pension funded through the state funds,” Sheldon says. Fossils are “a plane is headed for the ground. It’s either a soft landing or a crash.” He shakes his head, noting, “No one has sympathy for a business that goes under due to changes in the market.” This bill provides the signal and opportunity for companies that want to get with the program to do so gracefully. “This is the story of re-enterprise. This is exciting.”
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