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Now Everyone's Taxes Go Up   February 26th, 2009
Carbon permit system equates to economy-wide tax       


More observations...

President Obama's proposal for a carbon cap-and-trade system that would restrict carbon dioxide emissions equates to a $646 billion tax on the entire economy during a recession... and a tax that hits the poor hardest.


The Obama budget blueprint assumes that by 2012, the Treasury will be collecting $78.6 billion in new revenue from carbon emissions permits. From 2012 to 2019, it envisions that a total of $645.7 billion would be raised from auctioning of such emission allowances...

Congressional Budget Office director Peter Orszag, who is now head of the Office of Management and Budget under Obama, testified last year that the firms that were required to buy permits would pass the costs along to their customers in the form of higher prices...

A recent study by the Center on Budget and Policy Priorities, a liberal think tank, said, 'Low-income consumers are the most vulnerable (under such a system) because they spend a larger share of their budgets on necessities like energy than do better-off consumers.'

They also are 'least able to afford purchases of new, more energy-efficient automobiles, heating systems and appliances,' it said.

So, again, it seems that President Obama is intent on raising taxes... during a recession. And in this particular case it's a tax that will hurt the poor most due to higher prices on the things they buy.

Apparently the administration aims to counteract that with a rebate. However, the rebate is only 80% of the funds collected which means the poor will be paying this tax, and it'll hit them harder than the rich.

Having said that, President Obama's definition of "rich" has dropped to $110,000 if you're a married couple.

Under one scenario offered by Center on Budget and Policy Priorities, the U.S. Department of Energy 'would set the size of the rebate each year, based on the impact of the emissions cap on consumers' purchasing power.'

Married couples earning $70,000 or less and single filers earning $30,000 or less would receive a full rebate of their increased energy costs.

Married couples earning more than $70,000 but less than $110,000 and single filers earning between $30,000 and $50,000 would receive a partial rebate.

People above those income levels would get no rebate, on the theory that they could afford the increased energy costs.

So if you're single and earn more than $50,000, or if you're married and earn more than $110,000, your taxes are going up. And if you're not as rich, well, your taxes are still going up (because you'll only get 80% of the amount collected as a rebate.. the rest the government keeps).

And this is so strange since just three days ago, in his address to Congress, he said:

If your family earns less than $250,000 a year -- a quarter million dollars a year -- you will not see your taxes increased a single dime. I repeat: Not one single dime. (Applause.) Not a dime.

Whoops! Well I guess he did say you won't see your taxes increase. He's right. Very few people will see it because it'll be in the form of higher prices for products. But that's a tax all the same.

But you won't see it.

Update 3/4/2009: About a week after I wrote the above article, an op-ed piece in the mainstream media reported the same thing:

Despite President Obama's promise that 'If your family earns less than $250,000 a year, you will not see your taxes increase a single dime. I repeat: not one single dime,' his new budget raises 45 percent of its revenue from energy taxes that will be paid by everyone who fills a gas tank, pays an electric bill, or buys anything that was grown, shipped, or manufactured.

Update 3/9/2009: And about a week and a half after the original article written above, the Wall Street Journal reports:

Cap and trade is the tax that dare not speak its name, and Democrats are hoping in particular that no one notices who would pay for their climate ambitions... Once the government creates a scarce new commodity -- in this case the right to emit carbon -- and then mandates that businesses buy it, the costs would inevitably be passed on to all consumers in the form of higher prices. Stating the obvious, Peter Orszag -- now Mr. Obama's budget director -- told Congress last year that "Those price increases are essential to the success of a cap-and-trade program."

The Congressional Budget Office -- Mr. Orszag's former roost -- estimates that the price hikes from a 15% cut in emissions would cost the average household in the bottom-income quintile about 3.3% of its after-tax income every year. That's about $680, not including the costs of reduced employment and output. The three middle quintiles would see their paychecks cut between $880 and $1,500, or 2.9% to 2.7% of income. The rich would pay 1.7%.

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