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Oil Tax

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I know there is no way it will get past Congress, but President Obama is completely correct in calling for a $10 per barrel tax on oil to fund green infrastructure.

The proposal would go toward a $32.4 billion annual push to green the transportation sector by funding public transit, an urban planning initiative and clean vehicle research, the White House said in a fact sheet. Obama will include the plan in the budget request he releases next week.

The plan will likely die in the GOP-controlled Congress, which will vet Obama’s budget request before writing spending bills later this year.

But the proposal represents a new front in Obama’s climate change end-game: After finalizing carbon reduction regulations for the electricity sector last year, he is turning his attention back to the transportation sector, which accounts for 30 percent of American carbon emissions every year.

“The president’s plan does what we need to once again have a transportation system that is a source of American strength while at the same time taking steps to reduce carbon emissions and fight climate change,” Jeff Zients, the director of the National Economic Council, told reporters Thursday.

Charging the fee to oil companies, the White House said, is both a funding mechanism for the transportation initiative and an incentive for the private sector to move toward cleaner fuel.

Mostly, this is the correct policy. Now, it’s not without its downsides, in that were this to pass, it would be passed on to consumers, meaning that it would effectively be a regressive tax that made gas and heating bills a larger percentage of income for the poor than the rich. And I have a problem with that, not that there is an easy alternative solution. Otherwise, this is a correct policy in that it specifically targets climate-change inducing industries, incentivizing them, as well as drivers, to use less oil and move toward green energy, while using the money to build the infrastructure necessary to manage this transition. Of course, Republicans are opposed to hippie energy and infrastructure spending alike, so it will die. But this is along the lines of the policy Democrats need to constantly fight for.

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  • Warren Terra

    As with previous proposals for a carbon tax (and I think this has at least one advantage over that, of being more comprehensible): it provides valuable incentives, but is regressive in where it gets its money. The answer would be to use the money collected in a progressive manner, counteracting as much as possible the regressive part. Of course, that’s at least as unlikely as getting the tax enacted in the first place …

  • GFW

    it would effectively be a regressive tax that made gas and heating bills a larger percentage of income for the poor than the rich. And I have a problem with that, not that there is an easy alternative solution.

    Tax and (per capita) dividend. Easy enough to describe, and could be implemented on the 1040. Politically easy … well that’s a bigger question.

    • MaxUtility

      A revenue neutral tax does have some advantages like you point out. It would need to be much larger than $10/barrel to have any meaningful incentive effects. At $10/barrel, I think Obama is more looking for a source of funds to drive investments rather than a strong disincentive to burn fossils. To achieve it by just raising the cost of fossil fuel, you need a bigger stick than $10, especially given the price volatility of oil. But I suppose a much larger revenue neutral tax is “feasible” (at least as much as any of this is given that it ain’t gonna happen regardless.)

      • sonamib

        One could say that a $10 tax raises the oil barrel price by 33% right now. But then again, it would only push the price back to what it was in early December. So, as you say, it’s probably not a meaningful incentive.

        I don’t really know how high the gas tax is in Europe, but it must be quite high since gas costs about 1.30€/L here in Belgium (roughly $5.20/gallon). It doesn’t appear to have a meaningful effect on behavior though.

        • MaxUtility

          I believe Euro gas tax are roughly $4-$5 per gallon. I think it does have pretty big impact on how much and what kind of vehicles Europeans drive. That said, there are a lot of other auto ownership costs there that are higher as well, much better investment in public transit, major parking issues to disincentive driving, etc. etc. It also pushed them into diesel in a big way which isn’t really the effect we’re looking for either.

          I’m a big believer in using pricing to push things in the right direction. But it seems hard to believe that’s going to be enough in this case, unless we’re talking massive carbon taxes that could really force a major reworking of our energy usage.

          • sonamib

            That said, there are a lot of other auto ownership costs there that are higher as well, much better investment in public transit, major parking issues to disincentive driving, etc. etc.

            It’s hard to unbundle all these effects, but I do think that making driving a hassle is much more effective at encouraging people not to drive than just raising the price of gas. Here, white collar works often receive a car as part of their work compensation. For them, it’s a status thing, and they won’t give it up if it becomes more expensive to drive*, they’ll give it up if it becomes less glamorous.

            *Unless it becomes massively more expensive.

    • ProgressiveLiberal

      Exactly. This has the easiest fix in the world – give the money back in the form of a refundable credit – at ~22 barrels a year, this is $220 each. That way people who want to own mansions or jet all over the world get hit hardest.

      Also, it should be indexed to inflation (as long as we’re in fantasy land.)

    • No. The revenue-neutral carbon tax is exactly the kind of thing that dazzles policy wonks and Does Not Work in practice. The Oregon one is dying, having failed to attract any GOP support. Conservatives simply do not believe that the progressives advocating the tax will ever hand the money back if it ever passes, and will bait-and-switch to their favourite spending programme. Obama’s proposal recognizes this: it is a straightforward progressive tax-and-spend scheme, good tax, good spend.

      BTW, much infrastructure spending is progressive: it creates large numbers of working class construction jobs across the country.

      • AdamPShort

        Spending generally is a very progressive force, and infrastructure spending is politically popular. It would be nice if the taxation piece could also be progressive, but lots of things would be nice. Good tax, good spend is good!

  • sonamib

    For countries that already have a sales tax, it might be a good idea to replace it with a carbon tax in a revenue neutral way. Taxation doesn’t become any more regressive than it was before, and the correct incentives are put into place. It would also be nice if that carbon tax were set to gradually rise so that corporations and people keep trying to do better.

  • efgoldman

    The proposal would go toward a $32.4 billion annual push to green the transportation sector by funding public transit

    O M F G
    You might as well send a bill to the Republiklown RWNJ TeaHadis creating a statute saying god is dead.
    Public transit on its best day is devil spawn. Why just look at DC Metro (which they won’t fund, but that’s just a detail…)
    No, we gotta’ make the whole country look like Houston or Atlanta, except with better traffic jams.

    • Just_Dropping_By
      • Michael Cain

        Speaking just to the rail portion, Georgia had some sort of spasm 50 years ago and authorized it, but has largely ignored it ever since. I’d rather consider Denver’s light rail system, where voters directly approved the tax 12 years ago and the system is still under construction. In 2014 daily rail ridership was only about half of MARTA’s rail ridership, but this year three new lines will open, including the line out to the airport, so ridership should jump substantially. Since one of those lines will put two stations within two-and-a-half miles of my home, I’m looking forward to it.

      • addicted44

        Marta rail is little more than a way for people in the northern suburbs to make it to the airport without having to drive through the city (or I 285).

        The bus portion is designed to make life hell. There is no single Marta system, with most counties (Gwinnett and Cobb County in particular) having their own systems, which means the bus system forces you to follow a hub and spoke system where you have to go to 1 central hub so you can transfer to the bus system of the county you want to go to.

        MARTA cannot be included in any discussion of public transport. If you were a comic book villain who wanted to design a public transport system to kill any desire for public transport, your system would be designed very much like Marta.

      • cackalacka

        When I lived in Atlanta 20+ years ago, MARTA was a half-assed attempt to mitigate the damaging and crippling effects of sprawl, resulting in the largest white-fright migration of the second half of the twentieth century.

        At the time, it was notable for having a north-south/east-west line that serviced the airport and, to some degree, Fulton County Stadium.

        Flash forward twenty years and now it appears that the Crackers would prefer that it just service the airport.

    • Dennis Orphen

      A tombstone for God? That’s a great idea ef. And can you picture his body brought to the mortuary and hear that mumbling voice tell the mortician to use all his powers because he doesnt want his mother to see him like this?

  • joe from Lowell

    You can tell the bill stands no chance because the authors were willing to include money for planners.

  • nbeaudrot

    This is just a way of raising a gas tax while letting Congress say they didn’t raise the gas tax, right? I mean, yes, we use oil for other purposes, but mostly it’s just (a) returning the level of highway funding to it’s 1990s-2000s levels, and (b) actually making consumers of said highways pay for it?

    Not that I am complaining.

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