At least weekly letters in the Deseret News tout the benefits of a carbon tax and dividend, wherein oil companies are taxed at the wellhead and the proceeds are returned to consumers. Almost every letter boasts that this is a win-win for everyone. It solves global warming by curbing production! It costs consumers nothing! It punches those evil oil corporations in the gut!
But sometimes it behooves us to look at the real consequences of such a regulation, follow the money and determine just how it will affect us. Because this is not the solution everyone claims it to be.
The first problem is that a tax will not magically force energy companies to reduce production, because production is controlled by demand, not taxes. Society’s ubiquitous need for oil cannot be instantly curbed by placing a tax on it. As long as there is demand, new taxes are passed to the consumer by charging more for the oil. So there will not be a substantial reduction in production, which is supposedly the prime driver for this new tax scheme.
The second problem is that higher oil costs will inflate the price of almost everything in our lives in two ways: fuel and production of consumer goods.
When fuel costs rise, everything in your life is more expensive: every Amazon delivery, every plumber service call, every loaf of bread or can of peas will increase in price to offset the higher fuel price.
But oil is not just used as fuel. Most plastics are produced from petroleum. This includes everything from car parts to vinyl window frames to the synthetic fabrics in our clothing and the sunglasses on our faces. Oil price increases will force the cost of nearly every consumer good to increase. Such inflation, whether for fuel or consumer goods, will hit small businesses and the poor especially hard.
“But,” you say, “consumers receive a dividend, so it costs us nothing.” This would be a bad assumption. The tax is supposed to be revenue neutral, with all proceeds from the tax being rebated to the consumers. But the feds will certainly take some of that money to fund federal projects, because the bureaucrats think they know better how to spend our money than we.
Yes, we consumers will receive a dividend, but not proportional to the expense we individually will pay, and certainly not enough to offset inflated prices. And if you have a business that relies on travel (contractors, plumbers, deliveries), you will not be rebated according to your expenses. This tax will hit you hardest.
So why are the politicians pushing it so hard? First and foremost, it gives the appearance that they are solving the problem of global climate change by reducing production. But production will not appreciably decrease. And they are selling it to the electorate and environmentalists smeared with the honey of “free money” in the form of a dividend. They expect the electorate will be blinded by “free” money and not think too hard about where it came from.
Second, it gives Washington a source of revenue which they can claim did not come from you. They claim it is only the oil companies that are taxed, but that is not true. It’s an indirect, almost invisible tax; one that you, the consumer, pay without blaming the politicians. It is almost invisible because it is spread over every purchase you make, unlike the once a year income tax. Politicians think you won’t put two and two together and realize your increased cost of living is their fault.
Unfortunately, their subterfuge is working, because almost all letters to this page claim this is a consumer win. In fact, we all lose. The only winners are the politicians who get more of our money to spend. A “carbon tax and dividend” is not the solution we are looking for.
Brian Myers is an engineer and a small business owner in Davis County.