Democrats scramble to find carbon tax options for $ 3.5 billion bill


WASHINGTON – A single moderate Democrat’s opposition to increases in corporate and income tax rates has revived efforts in the Senate to draft a tax on carbon dioxide pollution as a way to pay for the budget bill $ 3.5 trillion proposed by the Democrats.

Senator Kyrsten Sinema, D-Arizona, has not advocated a carbon tax, which President Joe Biden and other key Democrats have avoided as a huge political risk. But his resistance to tax rate hikes to pay for Democrats’ ambitious social policy and climate legislation has sparked a race for alternatives, including a carbon tax, international changes to businesses, and closing loopholes for businesses that pay through the personal income tax system.

Senator Ron Wyden, D-Ore., Chairman of the Senate Finance Committee, confirmed that the Senate Majority Leader had asked him to draft legislation that would put a price on carbon emissions but for ensure the policy would honor Biden’s pledge not to raise taxes on families earning less than $ 400,000.

This could be done with some sort of rebate or “carbon dividend” to help taxpayers as the country shifts from gasoline-powered vehicles to electric cars and trucks, and from coal and natural gas power plants to renewables, said Wyden. . The discounts would mean less revenue available from the carbon tax to pay for other elements of the package.

“We have a lot of members who care very deeply about this,” Wyden said, quoting Senator Brian Schatz, D-Hawaii; Sheldon Whitehouse, DR.I. ; and Martin Heinrich, DN.M.

But other senators and Senate advisers have confirmed that the driving force of the moment is Sinema, the Arizona iconoclast whose impenetrable political positions in an equally divided Senate can wreak havoc on Democratic plans. She has previously said she cannot support a budget plan that spends $ 3.5 trillion, although she has not said what a price she can bear. Now his stance on taxation is shaking up Democrats.

Economists have said for decades that a carbon tax, which would make it more expensive to burn fossil fuels, is the most efficient way to shift the economy from fossil fuels to wind, solar and nuclear power, which do not produce the emissions that are heating the planet.

House and Senate leaders agreed that budget legislation would be largely funded by reducing the top tax rate to 39.6%, from the 37% that former President Donald Trump lowered it to in 2017. They also agree that the corporate tax rate should be up from 21%, also set in 2017.

But, Democrats confirm, at least for now, Sinema opposes both measures, which risks digging a major hole in the finances of a bill to tackle climate change, make a generous credit permanent. tax per child, extending preschool and community college to almost all Americans, and subsidizing child care, among hundreds of other issues.

“Almost every day for weeks, Kyrsten has engaged in direct and good faith discussions with his colleagues in the Senate and President Biden and his team,” said John LaBombard, his spokesperson. “Given the size and scope of the proposal – and the lack of detailed legislative language or even Senate-House consensus around several provisions – we are not offering detailed comments on a proposed element of the package during that these discussions are ongoing. “

Democrats like Schatz and Whitehouse have long promoted a carbon tax, and it enjoys some Republican support. But when a bipartisan group of senators tried to suggest it could pay a $ 1 trillion infrastructure bill, the White House hesitated, fearing it would hurt the middle class.

Politically, the prospect of adopting a carbon tax remains risky, Wyden said. Even though middle-class and low-income families receive discounts, fears of rising prices for electricity and some goods have frustrated other efforts, including those pushed by Governor Jay Inslee of Washington. , a democrat.

“We are very committed to honoring the President’s pledge not to take action exceeding $ 400,000, and I have personally studied what happened in Washington State, one of the bluest states. of the country, where Jay Inslee repeatedly tried to get a carbon royalty or price, and it went down, in large part because voters, as the economy transitioned, didn’t think it would make them whole “Wyden said.” In other words, they thought they would face unmanageable costs for their family. “

Democratic staff members said Sinema and Sen. Joe Manchin, DW.Va. – decisive votes on the budget bill – are engaged in talks on the carbon tax, but none has taken a position on this subject.

Depending on how it’s structured, a carbon pollution tax could be the most powerful policy adopted by the United States to tackle climate change.

A recent analysis by Newell staff found that a tax on carbon dioxide pollution in the United States that started at $ 15 per tonne and increased to $ 50 per tonne by 2030 would reduce carbon emissions national levels of about 44% from 2005 levels, allowing the Biden administration to do the maximum to its ambitious goal of reducing greenhouse gases by 50% from 2005 levels by 2030. He also found that such a program could actually lower, not increase, electricity bills.


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