American Enterprise Institute to Tax Or Not to Tax: Senators Sheldon Whitehouse and Brian Schatz Present Their American Opportun
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AMERICAN ENTERPRISE INSTITUTE TO TAX OR NOT TO TAX: SENATORS SHELDON WHITEHOUSE AND BRIAN SCHATZ PRESENT THEIR AMERICAN OPPORTUNITY CARBON FEE ACT INTRODUCTION: ARTHUR C. BROOKS, AEI PRESENTATION: PROPOSAL FOR A NEW CARBON TAX SHELDON WHITEHOUSE, US SENATE (D-RI) BRIAN SCHATZ, US SENATE (D-HI) CONVERSATION: TO TAX OR NOT TO TAX? JERRY TAYLOR, NISKANEN CENTER BENJAMIN ZYCHER, AEI MODERATOR: KEVIN HASSETT, AEI 2:30 PM – 4:00 PM WEDNESDAY, JUNE 10, 2015 EVENT PAGE: http://www.aei.org/events/to-tax-or-not-to-tax-sen-sheldon- whitehouse-presents-his-american-opportunity-carbon-fee-act/ TRANSCRIPT PROVIDED BY DC TRANSCRIPTION – WWW.DCTMR.COM ARTHUR BROOKS: Good afternoon, ladies and gentlemen. Please take your seats. Good afternoon. Please take your seats. Please have a seat in the back, if you can find a seat. Good afternoon. I’m Arthur Brooks, president of the American Enterprise Institute, and I’m delighted to welcome all of you to this event today entitled “To Tax or Not to Tax.” This is the think-tank version of Shakespeare, clearly, and it features our two keynote speakers, Senators Whitehouse from Rhode Island and Schatz from Hawaii, which we’re very much looking forward to. These men are no strangers to most of you, but I’ll give you a little bit of their background nonetheless. Senator Sheldon Whitehouse was first elected in 2007 and currently serves as the ranking member of the Judiciary Subcommittee on Crime and Terrorism, and Environment and Public Work Subcommittee on Fisheries, Water, and Wildlife. Before his election to the Senate, Senator Whitehouse was the attorney general of Rhode Island, the U.S. attorney for Rhode Island, and the state’s director of business regulation. Senator Schatz, who will join us very shortly. He’s in a taxicab on the way over and will speak after Senator Whitehouse. He was first elected in 2012 and believe it or not, he’s Hawaii’s senior senator. (Laughter.) Tenure happens fast in the Pacific. He currently serves on the Appropriations Committee; the Commerce, Science, and Transportation Committee; and the Committee on Indian Affairs. He previously served as lieutenant governor of the State of Hawaii and in the Hawaii State House of Representatives, where he served as the House Majority Whip. We’re looking forward to hearing the presentations of the senators. And following their remarks, our director of economic policy studies, Kevin Hassett, will moderate a panel discussion with AEI’s Ben Zycher and the Niskanen Center’s Jerry Taylor on both the pros and also the cons of imposing a carbon tax in the United States. Please welcome me in joining Senator Whitehouse. (Applause.) SENATOR SHELDON WHITEHOUSE (D-RI): Arthur, thank you very much and thanks so much to the American Enterprise Institute for hosting this event. I’m excited today to introduce the American Opportunity Carbon Fee Act of 2015. And I look forward to a productive discussion. Thanks also to Jerry Taylor and Benjamin Zycher for participating in the conversation that will follow my remarks and for your input on my bill. And of course, a thank you to Senator Brian Schatz of Hawaii, who is my lead co- sponsor. I will start by saying the obvious. Climate change is real. It is virtually universal in peer-reviewed science that carbon pollution from burning fossil fuels is causing unprecedented climate and oceanic changes. Every major scientific society in our country has said so. Our brightest scientists at NOAA and NASA are unequivocal. The fundamental science of climate change is indeed settled. Americans, in poll after poll, understand climate change is real, know humans are the cause, and want their government do something about it. Climate change, of course is not our only national issue of concern. The federal tax code, for instance, is a mess, with one of the highest corporate rates in the developed world, while some businesses take advantage of loopholes to pay much less or nothing at all. We have an economic recovery that has left too many Americans behind and a job market that has still not fully rebounded. Well, what if our answer to climate change helped address those concerns as well? And what if that approach was firmly grounded in core conservative economic principles – values like property rights, market efficiency, and personal liberty? AEI’s Aparna Mathur conducted an analysis with a colleague from the Brookings Institution showing that a carbon fee could reduce emissions, shore up the fiscal outlook, and play an important role in broader tax reform. Kevin Hassett, who will be moderating the discussion of my bill, along with Steven Hayward and Kenneth Greene, has pointed out that a carbon fee could obviate some environmental regulations. The idea is simple. You levy a price on a thing you don’t want – carbon pollution – and you use the revenue to help with things you do want. Whether you call them neighborhood effects or negative externalities, the effects of carbon pollution harm all of us. Conservative economist Milton Friedman wrote that the government exists in part to reduce just such harms. When the costs of such externalities don’t get factored into the price of a product, conservative economic doctrine, indeed all economic doctrine, classifies that as a subsidy – a market failure. Right now, for fossil fuel producers that subsidy is immense, giving them artificial advantage over cleaner energy sources. A carbon fee can repair that market failure by incorporating unpriced damage into the costs of fossil fuels. Then the free market – not industry, not government – can drive the best energy mix for the country, with everyone competing on level ground. That’s how Nixon Treasury Secretary and Reagan Secretary of State George Shultz sees it. He and the late Nobel laureate Gary S. Becker made the case for a carbon fee in the Wall Street Journal. Americans like to compete on a level playing field, they wrote. All the players should have an equal opportunity to win based on their competitive merits, not on some artificial imbalance that gives someone or some group a special advantage. Just last week, even CEOs of Europe’s major oil companies called on governments to institute national prices on carbon. This could become a big economic win. George W. Bush’s Treasury Secretary Hank Paulson said, a tax on carbon emissions will unleash a wave of innovation to develop technologies, lower the costs of clean energy, and create jobs as we and other nations develop new energy products and infrastructure. It is in that spirit that I introduce the American Opportunity Carbon Fee Act, a framework I hope both Republicans and Democrats can embrace. The bill would establish an economy-wide fee on carbon dioxide and other greenhouse gas emissions. The fee would be assessed upstream, where it’s easiest to administer, minimizing the universe of taxpayers and the compliance burden at the coalmine, at the natural gas processing station, and at the petroleum refinery. Other sources of greenhouse gas emissions would be charged at existing reporting requirements at a rate tied to the carbon-dioxide equivalency of each gas. Fluorocarbons, which are used for refrigeration and industrial purposes, would be assessed at a special rate that accounts for their high greenhouse potency. Sequestering, utilizing, or encapsulating carbon dioxide earns you a credit. My bill sets the fee per ton of carbon at $45 in 2016, the central range of the social cost of carbon as estimated by OMB, and would increase it each year at a real 2 percent. When emissions fall 80 percent below 2005 levels, the annual adjustment would fall to inflation. Border adjustments for the trade of energy-intensive goods include tariffs on such goods imported from countries with weaker or no carbon pricing, and rebates for U.S. exporters. We took care to design the border adjustments to achieve harmony with World Trade Organization rules. According to the nonpartisan group Resources For the Future, this carbon fee proposal would reduce U.S. CO2 emissions by more than 40 percent by 2025. In addition to the environmental benefits, this carbon fee would generate over $2 trillion in revenue over 10 years. It is intended to return every dime of that to the American people. Here’s how. First, the bill lowers the top marginal corporate income tax rate from 35 to 29 percent. This would cut corporate taxes by almost $600 billion over the first decade. Second, it provides workers with a $500 refundable tax credit, or $1000 per couple, to offset the first $500 each paid in Social Security payroll taxes. That credit would grow with inflation. The tax credits would return over $750 billion to American households over the first ten years. Third, it would give benefits to retired folks past their taxpaying years – Social Security recipients, veterans’ program beneficiaries, and certain other groups of retirees at the same level as the payroll tax credit. These benefits would total more than $400 billion over 10 years. Finally, the bill would establish a small block grant for states, totaling $20 billion in 2016 and growing with inflation, to help with low-income needs, rural households, and transitioning workers. West Virginia, for example, could use money to train coal workers for the technology jobs of the future. Rhode Island, on the other hand, might choose to make homes more energy efficient. And we have a reporting mechanism for the public to track where the money is going, to assure it’s all going back to the American people. The entire bill is 37 pages long. Short, simple, straightforward. It would cut back on the pollution that threatens dramatic changes to our home planet.