Grover Norquist Bombshell: Pairing A Carbon Tax With Income-Tax Cut Wouldn’t Violate GOP No-Tax-Hike Pledge

Grover NorquistHas Hell (And High-Water) frozen over?

The National Journal reports today:

In a step that may help crack open the partisan impasse on climate change, Grover Norquist, the influential lobbyist who has bound hundreds of Republicans to a pledge never to raise taxes, told National Journal that a proposed “carbon tax swap”—taxing carbon pollution in exchange for cutting the income tax—would not violate his pledge.

Norquist’s assessment matters a lot, and could help pave the way for at least a handful of Republicans to support the policy. Over the past six months, a growing number of conservative voices, including former Republican officials and renowned economists, have amped up pressure on their party to finally address climate change.

Lots of folks have been jumping on the carbon tax band-wagon (see “Bipartisan Support Grows for Carbon Price as Part of Debt Deal“). The Washington Post editorial board boarded this weekend.

Even a modest carbon tax can deliver serious revenue (see “20 Dollar Per Ton CO2 Tax Could Reduce Deficit By $1.2 Trillion In 10 Years“). The two key questions are:

  1. Is a tax politically feasible?
  2. Is the politically feasible tax environmentally meaningful?

I’ll address the second question in detail in a later post. But for now I’ll point out that any tax in the $15 to $25 a ton of CO2 range (together with other policies already enacted, such as the fuel economy standards) would almost certainly achieve a CO2 cut greater than 17% by 2020 (compared to 2005 levels). That 17% cut was Obama’s pledge going into the Copenhagen climate talks. I think that any such U.S. carbon tax would have a transformational effect on global climate talks. Indeed I imagine a significant fraction of the nations of the world would probably seriously consider adopting whatever carbon tax the United States adopts.

It’s been fairly clear that the only way you could get a carbon tax is if you could give Republicans something they wanted more in return. That is, the carbon tax has to make the debt and tax reform deal easier not harder — since obviously that deal is monumentally difficult already, without introducing the climate issue. So, some sort of swap made sense.

The biggest obstacle has been Norquist’s infamous “no new taxes” pledge taken by the overwhelming majority of Republican members of Congress:

The problem is that creating a new “energy tax” would be viewed by some as political suicide. And Republicans who have signed Norquist’s pledge would be barred from supporting it.

That’s where the “swap” side of the policy comes in: The new carbon tax would be paired with a cut in the income tax—something Republicans have long sought. The idea essentially would be to cut the tax on income and move it over to carbon pollution—keeping the proposal revenue-neutral.

It’s possible you could structure something that wasn’t an increase and didn’t violate the pledge,” Norquist told National Journal.

That qualifies as a bombshell.

Norquist himself doesn’t like the tax, but he misunderstands the politics I think:

“If the Democrats thought it was a good idea and the country wouldn’t hate them for it they would have done it in 2009,” when their party held majorities in both chambers of Congress, he said.

Still, if the tax swap could indeed be structured in such a way that it wouldn’t violate Norquist’s pledge, it could remove at least one political obstacle for some Republicans.

Uhh, Grover, the Democrats thought that something far more complicated was a good idea: a cap-and-trade system that extended out 40 years (far further in the future than any other country in the world had ever contemplated a domestic carbon bill) — and it ultimately would have required a very high carbon price, far higher in, say, 2040 than one would contemplate for just a 10 year budget deal.

The point Norquist seems to miss is that if a carbon tax were part of a bipartisan budget deal that truly put our debt and deficit trajectory on a more sustainable path, everyone involved would have political cover to make politically difficult choices:

“We hear frequently, constantly from Republican lawmakers who say, we see climate change as a huge problem and we want to talk about ways to do this, but for now they’re afraid to talk about it, because of the political repercussions,” said Rob Sisson, president of the group ConservAmerica, formerly Republicans for Environmental Protection.

For those who want to become more knowledgeable about the ins and outs of a carbon tax, Brookings, AEI, the IMF, and Resources for the Future are sponsoring an all day forum on it Tuesday. You can watch it live here. Climate Progress will be covering it.

49 Responses to Grover Norquist Bombshell: Pairing A Carbon Tax With Income-Tax Cut Wouldn’t Violate GOP No-Tax-Hike Pledge

  1. Merrelyn Emery says:

    The questions are what and/or who is going to get taxed and how the money is going to be used? USA has a terrible inequality problem which is as much a drag on health costs and economic ‘recovery’ as it is socially maladaptive. Any carbon initiative must act to lessen this, not add to it, ME

  2. Susie Madrak says:

    Would this really be net revenue — or, as is more likely, the costs of cleaning up after the superstorms that result from decades of Republicans insisting global warming wasn’t real simply eat up the difference? Gov. Cuomo just asked for $30 billion to clean up New York after Hurricane Sandy.

    And besides, why does this unelected little Napolean get to rule the world?

  3. Omega Centauri says:

    Generally a carbon tax is viewed as being regressive, i.e. it would cost the poor a larger chunk of income than the rich. If it was part of a tax and rebate program, revenues from the tax could be spent to make the net effect progressive. Thats tougher if you have to completely offset it with other tax cuts. There is going to be considerable horse trading needed to get an entire package which is at best class neutral. It would be best if some combination of rebates are energy efficiency for the poor were included as part of the package.

    Otherwise I love it. And yes the poor will suffer more from climate change than the rich, so we might be able to stomach a less than ideal social outcome?

    Its also possible the Republicans might go along in the hopes of taking climate change off the political agenda, as otherwise its likely to hurt their prospects in the future.

  4. catman306 says:

    How much does a $20 per ton carbon tax on gasoline add to the price of a gallon?

  5. Steve says:

    Combining a carbon tax with a big increase in the personal exemption would go a long way toward addressing the regressive nature of the tax. Restoring Making Work Pay would be another way. A tax cut at the low end of the income scale should address any concern about adding new taxes. It also would cut taxes for those who need it most.

  6. Gestur says:

    If you mean a tax that starts at $20/metric tonne of CO2e as the CBO considered, that would only increase the price of gasoline by about $0.20/gallon. That particular proposal calls for the tax to go up very slowly at 5.6% p.a. in nominal terms. At that rate it would take until 2043 to get to an impact on a $1 increase in a gallon of gasoline.

  7. Zarrakan says:

    Throw Grover Norquist in jail now. He’s a traitor to America. TAKE AMERICA BACK VOTE DEMOCRAT! Giving all the money to the 1% DOES NOT WORK. Business will not employ people they don’t need, or pay their employees more, just because they have more money. I made a video about unemployment, and how we can fix it. It’s at my YouTube channel Zarrakan, and here’s the name:
    2012 6 5 ZOC Job Pyramid
    Watch it, share it, and join the fight against those who want to kill all of us with destructive social policies.

  8. Daniel Jones says:

    Grover wasn’t elected by anyone and tax policy is just HIS opinion. We can make up our minds without his advice.

  9. Hank_ says:

    For Joe;
    The “BBC 28” list has been released, despite the efforts of the BBC lawyers and the courts to supress it.
    See any of the skeptic blogs for details.

  10. Bob M says:

    Grover – hello? – your taxes are going up AND there will be a carbon tax. You’re little swap-thingy is cute in a 2007 kind of way but it’s 2012 and your Republican friends are in no position to bargain.

    If that’s too hard to accept, I hear Karl Rove is building a survival shelter in the desert. You can move in with him and play video games.

  11. Joan Savage says:

    Norquist is yoking it together in a way that creates a seesaw.

    The deeper the income tax cut for the wealthy, the higher the CO2 tax for everyone, or vice versa, less income tax cut and more CO2 tax.

    If it gets tamed down to retaining tax cuts for the middle class, it might not be so obnoxious as tax cuts for the wealthy.

    Even so, calculating how much gasoline, coal and methane would have to be burnt to generate enough CO2 tax revenue to replace lost income tax revenue could get ugly.

    I think we need to see some better estimates on what is on Norquist’s budgetary seesaw.

  12. Mike Roddy says:

    You’re right, Merrelyn. Norquist is not a good person, and is the wrong man to negotiate with- especially since he does not have a real position of authority. Norquist’s calling card is to act as a spokesman for far right plutocrats, which somehow got twisted by the right wing press into being presented as some kind of gravitas. His only legitimate claim to fame is the drowning in the bathtub line, but knowing Grover, he probably stole it from someone.

    The Republicans just lost, and much of that defeat came from public rejection of the Norquist wing. There are not many moderate Republicans left in office who could lead this critical negotiation, but all it takes is one.

    Bloomberg comes to mind, or possibly Collins or Schwarzenegger. The rest of them are just too… something.

  13. Joan Savage says:

    Correction – less of an income tax cut could end up coupled to a lower CO2 tax rate.

  14. JGiven says:

    You can fix the regressivity somewhat by offsetting carbon tax incidence with tax credits, the same way you do for the payment of other taxes and receipt of other credits.

  15. Addicted says:

    The Carbon Tax should not be used to “reduce the deficit” or find tax cuts for the rich.

    Either use it to fund research, or even better politically, send a fixed amount back to everyone.

    This would make it a marginally progressive policy, not necessarily taxing the populace at whole, but redistributing from heavy carbon users to low carbon users, with a slight bias towards the poor.

  16. Timothy Hughbanks says:

    Over the past 35 years, the benefits of impressive gains in productivity have gone – ALL OF THOSE BENEFITS – have gone to increasing the incomes and wealth the top 5% and almost all of that has gone to the top 1% and even of that, the top 0.1 % have taken the largest share. So, an unelected Napoleonic lobbyist for the uber-wealthy wants to swap a carbon tax that will disproportionately impact the middle class for an income tax reduction that will heap even more wealth on the wealthy? The income tax is basically the ONLY prograssive tax in the US. If Obama goes for that instead of a carbon-tax to shore up and/or replace the payroll tax, then his deal will be rightfully seen as a total capitulation to the very same people he just beat in the election and betrayal of the middle class. The deal will die in the Senate and Obama will be the lamest of lame ducks. Grover Norquist is finally being identified as a principal source of the dysfunction in the GOP and you’re going to give this fanatic oxygen? Huge mistake.

  17. David B. Benson says:

    Income tax cut? Sure. Cut it so that it becomes much more progressive. John Stuart Mill and all that…

  18. prokaryotes says:

    As i understand, the US oil production goes up (So does the oil subsidies?) In return to a taxing, this could mean for oil companies not much of a lose.

  19. Mulga Mumblebrain says:

    Susie, Napoleon Bonaparte was a very great man, for all his faults. The comparison is odious.

  20. Mulga Mumblebrain says:

    Exactly, but that goes against a Rightist Commandment, ‘Thou shalt take from the many to give to the very, very, few’.

  21. Mulga Mumblebrain says:

    Hate to be a bore, but what ever happened to the ‘working class’ in the USA?

  22. Mulga Mumblebrain says:

    I’m with you. Norquist is a Trojan something or other unmentionable. This type suddenly, from time to time, feign ‘reasonableness’, but one look at his record and previous rhetoric says ‘Caveat Emptor’.

  23. Mulga Mumblebrain says:

    What is needed is a wealth tax, a Tobin tax, inheritance taxes (to set a ‘level playing-field’) and sending the Marines into the Cayman Islands, Monaco, Leechenstein and all the other bolt-holes for the parasites’ tens of trillions, to liberate them to serve humanity.

  24. Tom Bennion says:

    Given that Norquist has no concern about climate change (according to google – he hasnt been associated with it until yesterday), you have to assume he is using the climate tax as a wedge issue.

    He wants the Dems to take the bait, which will allow the GOP to go big on how this will particularly hurt the working poor. This will broaden out to discredit all tax hikes.

    Seeing this trap, Obama may react cautiously to the Norquist proposal. Much to the dismay of progressives. Norquist wins again.

    Better to work with people truly concerned about climate change and wanting to work towards a solution to that.

    Someone needs to interview him on his (until now unknown) climate change views.

  25. Tony Weddle says:

    I’m not sure that a revenue neutral carbon tax would have the impact you think it would (17% reductions in emissions by 2020). Surely, if costlier carbon is offset by reductions in other taxes (that is, by increases in available income), though spread unevenly, the impact will not be as great as you hope?

  26. JCF says:

    Any “revenue-neutral” scheme is DOA. The whole point is that we need to INCREASE REVENUE to both cut the deficit, and invest in key (neglected too long!) areas.

    If a carbon tax is PART of this revenue-increasing formula, I would certain be willing to consider it. But it should be progressive, the way income tax is.

  27. Anne says:

    The only thing little Grover did was to admit that a positive tax plus a negative tax of the same amount equals zero. Allowing that +X-X=0, and such a paired arrangement does not technically violate his stupid pledge that has caused so much trouble already, is not an endoresement or a proposal or even an idea. All this proves is that the man can do simple math. The fact that the + side of the equation has a C in it should not cloud our judgment. That said, if a critical mass of R’s and D’s would actually go for a Carbon Tax (quack quack) then my recommendation is this: UPSTREAM, UPSTREAM, UPSTREAM. The more upstream you go, the simpler and purer the policy is to craft and enforce. Oh, and another recommendation: don’t call it a BTU tax. No one will know what you’re talking about and everyone will think the British Are Coming, again. We’ve been there, and done that.

  28. Ozonator says:

    I still believe that the extreme GOP has a boatload of money and promised money to fight for their AGW freedom not tapped in the presidential election. Overt action (eg kissing sound toward Grover) will dominate the media for several months while the tentacles grow back. Just in time for the nation to forget about AGW Hurricane Sandy as several more towns from the South to Midwest are wiped out by AGW tornadoes. Cap & Trade is nothing for the 47% in the short run without FEMA, EPA, and Obamacare.

  29. Dennis Tomlinson says:

    The yeomen have gone serfing.

  30. BillD says:

    This idea seems too late for the “fiscal cliff negociations.” What about a plan by both Dems and Republicans to go over the cliff and then cut taxes on Jan. 2? Why would such a plan be such an economic disaster. It’s the best way for the conservatives to untie their self imposed “Grover chains.”

    It will be interesting to read what the oil and coal companies have to say about such a tax. No doubt that states such a mine (Indiana), that get most of their electricity from coal, will not be happy. However, I have already written to my Congressmen, including Sen Donnelly, warning them that a carbon tax was in the “mid-term future.” My estimate was in the next 2-10 years. I think that as the public starts to understand climate science and as the percent accepting reality goes above 80%, not only will be we see calls for a carbon tax, but the amount of the tax will get bigger. The increases in US gas and oil production will also make the tax more palatable. It seems that the cost of extraction has gone down and fossil fuel profit margins are going up.

  31. BillD says:

    Does this mean that a sizeable part of the GOP believed in the science all along and were just not willing to speak out against the anti-science voices in their party and in right wing “news organizations?”

  32. adelady says:

    I really object to the proposal being a tax cut. The fee and dividend system is much fairer and more transparent.

    The only way to make this tax cut proposal fair is to increase pensions and other payments to non-working citizens as well as the tax cuts to the rest of income earners. Not sure that Norquist would be too thrilled with that.

  33. aenoch says:

    Yeah. How does this Nover Grovequist dude get away with publicly declaring that he is out to destroy the government? And what about elected officials swearing allegiance to this traitor. We the people are being assaulted through the entitlements to the hydrocarbon industries that get a free pass to destroy our world for their profit. This guy is the real suicide bomber. What part of treason don’t they understand

  34. Brooks Bridges says:

    There was another bomb shell from the right last Sunday.
    Weekly Standard Editor Bill Kristol said on Sunday that the Republican Party should stop defending “a bunch of millionaires” and let the Bush-era tax cuts expire for the wealthiest Americans. They don’t come much more right wing than Kristol. An interview on Fox News.–politics.html

  35. Brooks Bridges says:

    Tax cuts for wealthy helping economy is another right wing myth. This report came out in September, was suppressed briefly by Repubs then restored.
    “Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945”

    It shows there is 0 correlation with economic growth, investment or savings but a good correlation with growing income inequality.

    So Republicans are pledging allegiance to a tax lobbyist for the rich instead of America in the face of clear evidence it’s harming America.

  36. Joan Savage says:

    Surely you know the answer. We lost the hard core manufacturing jobs that had given labor unions real leverage. Much employment shifted to a soft core service economy. Minimum wage is set so low that the threshold items for having a household, like renting a two-bedroom apartment, means working 70 hours a week or more just for the apartment alone. It is still rare for people to grow food for their own diet. Unfortunately the influential wealthy control pricing of several basic needs, food, fuel, medical care, and are reaching for control of public education.
    The bitter thought for me is that like European royalty in days of yore, the wealthy today seems to forget that their power is derived from the cooperation of their customers. I could go on, but as I said already, you probably already knew this. Thanks for an opportunity to tighten up my rant.

  37. Joan Savage says:

    The awkward phrase of a Republican “civil war,” came out in early post-election commentary, in anticipation of repositioning like Kristol’s.

    George Stephanopoulos (ABC News) may have jump started the civil war phrase, but it has traction with O’Reilly and McLaughlin and Fox News.

    The existing GOP coalition is on the wane, at least for voter demography, if not for dollars.

  38. Omega Centauri says:

    Surely thats the right thing to do. But the “right” thing, and the politically possible rarely meet. We can afford to let the perfect be the enemy of the merely good.

  39. Chris says:

    If only we could tax the hot air spewed by Republicans we could have a balanced budget.

  40. Joan Savage says:

    In the 48 days left to resolve the budget crisis, the stuff that is solidly on the table are budget cuts, closing tax loopholes, and categorical tax increases. Norquist’s proposal sets it up to help his allies get something now, without a solid piece of legislation for a carbon tax to match up in the package. And would we count on his allies in Congress to keep their word and cooperate with a carbon tax later? Doubtful.

  41. Sasparilla says:

    I’d like to see a carbon tax occur, but it shouldn’t be used as a lever (the way Mr. Norquist would like) to make the U.S. tax schedule more regressive.

    In amongst all this, once Jan 1st occurs the actual tax rates will go up and the Republicans will have more wiggle room to work with since so many have signed pledges not to raise taxes (and would be defeated in primaries if they did) – since the taxes will up already. House Leader Boehner also faces re-election amongst his radical house membership at some point in January as well (with Rep. Cantor wanting his job) making it harder for him to be flexible until that is past as well.

  42. Brooks Bridges says:

    Yes! Or put another way – that although we’re constantly told the American consumer is the engine of the economy (from which the wealthy profit) they appear clueless they’re starving that engine of fuel; literally killing the goose laying the golden eggs.

    But suspect the correlation between having a talent for becoming wealthy and having wisdom is near zero.

  43. Brooks Bridges says:

    I was slow to realize just how deep (blackly humorous?) your reply was ( “The yeomen have gone serfing.”) Brilliant!

  44. Mark E says:

    Want a carbon tax? Then convince the wealthy we are going to come after them to pay down the debt because that is the PROGRESSIVE way to do it. (Progressive – where the rich pay a large % and poorer you are you pay a smaller % of your total wealth)

    So once the wealthy are sweating about a PROGRESSIVE solution, then dangle a share-and-share alike carbon tax as an alternative. Suddenly a lot of the rich will back the alternative carbon-tax plan. After all, if you are in the 1%, having everyone pay down the debt sounds a lot better than just having you and the your pals in the 1% carry the full load.

    Of course that is a REGRESSIVE tax, unfairly carried on the shoulders of the poor.

    But hey… if you are rich and you can not prevent a tax increase then the best Plan B is to make the poor pay it, right? So say hello to a carbon tax, but say bye bye to Hansens revenue-neutral vision of what it would look like. It will happen, but it will happen on the backs of you and me.

    Regrettably the situation is such that we have to pretend to be happy about this.

  45. Mike Roddy says:

    Good idea! Switzerland, too.

  46. scott says:

    #1 It’s NOT A TAX. -just as speeding fines are not a tax on cars.

    This is not a “bombshell”… it’s a strategy to breed acquiescence .

  47. Mulga Mumblebrain says:

    Inequality is the root cause of the deepening economic implosion. Drive down wages, as has occurred in the US for forty years (and is being aped in the UK and Europe)where median wages have gone nowhere, and consumption suffers. First you send out other family members to be exploited for low wages, then, when even that is insufficient, go into debt, typically by borrowing against the rising ‘value’ of your home in the property bubble. Household debt goes through the roof, until it becomes unpayable. Meanwhile allow the elite to grab every cent of economic growth, further heightening inequality. When the property bubble bursts, and household wealth, particularly in black and Hispanic communities, is devastated, help things out by bailing out the banksters with twenty trillion or so, to be paid for by the sucker public in extreme spending cuts and ever lower wages and conditions etc. It’s a death spiral, from which the Western economies will not escape, as economic power moves East and ecological catastrophe deepens. That the USA is being hard hit by drought, fire, storm and other climate disasters is a bitter irony, but when you sow the wind, you must reap the whirlwind.

  48. Mulga Mumblebrain says:

    Don’t believe it! They’ll say anything to fool the patsies, but once back in power it will be the same old Republicans (well, the recent Republicans)working for their base ‘the haves and the have mores’.