Conservative Republican Bob Inglis is a man on a mission. The former congressman from South Carolina seeks to use the conservative principles of free enterprise, limited government, liberty, accountability and reasonable risk avoidance to solve our nation’s energy and climate challenges.

Inglis’ preferred solution to implement those core principles is a revenue-neutral carbon tax. Such a tax, he believes, would level the playing field by forcing all energy suppliers to face their full costs and allow all energy subsidies rendered unnecessary by this policy to be eliminated. Energy choices then could be left to the market, instead of the government picking the winners. Furthermore, since the tax would be revenue neutral, it would not finance any new programs; government would not grow.

Revenue neutrality would be achieved via a tax swap — the increased revenue from a carbon tax is offset dollar for dollar by a decrease in the tax rate on another current tax.

Other proposals suggest rebating the revenue directly back to households.

The empirical evidence suggests that assuring the tax is revenue neutral actually stimulates the economy and employment growth, reversing the traditional argument that a carbon tax is a job killer.

Inglis is not alone among prominent Republicans. George Shultz, who was the secretary of the Treasury under President Richard Nixon and Secretary of State under President Ronald Reagan, also supports a carbon tax. Both men have become members of the advisory committee for the Citizen’s Climate Lobby, a nonpartisan group formed to educate about and to lobby for a revenue-neutral carbon tax. (A Mid-Maine Chapter of CCL has organized in Waterville.)

Art Laffer, the principal economic adviser for the Reagan administration, notes that the case for a carbon tax is persuasive even for those who are uncertain about the state of climate science. “One need not take a side in the debate regarding man-made global warming in order to support improvements in U.S. energy policy,” he said. “Instead, by eliminating subsidies for all fuel types and making all fuel types accountable for their costs, free enterprise will make clear the best fuels for our future. Reduce taxes on something we want more of — income — and tax something we arguably want less of — carbon pollution. It’s a win-win.”

In referring to the desirability of a carbon tax vis à vis other approaches involving regulations or subsides, Harvard Professor Gregory Mankiw, the chief economic adviser during the George W. Bush administration, noted “Among economists, the issue is largely a no-brainer. … The hard part is persuading the public and the politicians.”

It turns out that some publics and some politicians already have been persuaded. Carbon taxes already exist in a number of countries, as well as the Canadian province of British Columbia. A recent official review of the British Columbia tax, implemented in 2008, found, “Government believes that a revenue-neutral carbon tax, where tax reductions are applied broadly across individuals and industries, is the best way to protect overall economic growth, while still creating a meaningful incentive to reduce greenhouse gas emissions.”

Given this overlap between the Republican desires for a more cost-effective energy policy and the Democratic quest to reduce the threat from climate change, this apparent area of common ground (in a political environment that has previously found very little of it) should be encouraging to those who seek bipartisan solutions.

It is important, however, not to get too carried away with the possibilities. Not all of this ground is common. Significant issues would have to be negotiated before any legislation could pass. First, how high should the carbon tax rate be? And how should it evolve over time? Second, revenue neutrality can be achieved either by a tax swap or by rebating the revenue to households. Which approach should prevail? Third, if the preferred path involves a tax swap, what specific tax will be targeted for lower rates (income tax? capital gains tax? Medicare tax? corporate tax?)

Stay tuned, and join the conversation.

Tom Tietenberg is Mitchell Family Professor of Economics, emeritus, at Colby College in Waterville. He has assisted both conservative and progressive governments in designing and evaluating cost-effective policies to control pollution.

filed under:

Augusta and Waterville news

Get news and events from your towns in your inbox every Friday.


  • This field is for validation purposes and should be left unchanged.