 Commentaries
 Printable Version |
 Email to a friend
Stern Report: Stern Taxes, Steep Price for Consumersby
Sam Batkins Jan 10, 2007 For Americans who aren’t eager to open their W-2’s yet and prepare for another
laborious tax season, a new report might make paying taxes all the more burdensome.
The report wasn’t issued by any among the litany of alphabet soup agencies in
Washington, but by Her Majesty’s Treasury Department in England. Known as the Stern
Report, it details the current impact of climate change and what is needed to abate levels
of carbon dioxide emissions that are deemed hazardous. Although it does
recommend incentives for energy innovation and removal of barriers to energy
efficiency, the Stern Report also calls for steps that would devastate taxpayers.
The report’s recommendations are especially sweeping, by explicitly endorsing
price controls for the cost of carbon emissions and contending that “taxes can set the
global price of greenhouse gases, and emitters can then choose how much to emit.” This
statement is suspect, because taxes are by definition compulsory … there is little “choice”
involved. When money is taken from individuals and firms, they have less to spend, save,
and invest, which affects other businesses, consumers, and employees.
Price controls—i.e., imposing a cap or a floor on costs of goods and services—
have been attempted since the dawn of human commerce and produce similar adverse
effects. President Nixon’s policies provide one example of this disastrous history. From
the institution of wage and price controls in 1971 to their end by 1974, inflation of U.S.
prices had more than doubled, reaching a perilous 11 percent annually.
Whether through taxes or price controls, the Stern Report concedes that its agenda
would deliver an economic shock. “Trying to abate rapidly in the short term—when the
capital in industries emitting greenhouse gases is fixed and technologies are given—can
quickly become costly for firms, as the marginal cost of abatement is likely to rise
sharply.” So just what are these costs?
The Congressional Budget Office (CBO) issued a report in 2002 on policy
initiatives that could curtail gasoline consumption. One of the proposed ideas was a
modest 4.3-cent gas tax increase. CBO calculated that this increase would result in an
average yearly increase of $44 for consumers in low-income states. Imposing the carbon-
control policies of the Stern Report on a national scale would, according to the Cato
Institute, cost approximately $1,154 per household in the United States: a steep amount
for most consumers who are already contending with high energy prices.
CBO estimated that the lowest income decile spends an astounding 11.4 percent
of their income on gasoline, mostly in rural areas where public transportation is scarce.
Artificially rigging higher prices at the pump would only worsen this burden on those
who are least able to cope.
On a national and transnational scale, the expense is much higher. The report
notes, “Ultimately, stabilization—at whatever level—requires that annual emissions be
brought down to more than 80% below current levels.” What are the costs of such a
drastic, and some would say untenable, reduction? According to the report, costs to the
global economy could reach upward of 2 percent of GDP by 2050 – a seemingly small
share that would actually amount to over $266 billion this year (and much more in the
future). And with a new study from the United Nations showing that livestock contribute
a larger share of greenhouse gas emissions than transportation, this expense may be for
naught.
Few could argue that the Stern Report is deceptive. It explicitly suggests that
drastically curtailing C02 emissions through price controls and taxes will have profound
economic consequences, yet that is precisely what it recommends. U.S. policymakers
who want to grapple with global warming should give most of the Stern Report a cold
shoulder. Taxpayers, already stressed over April 15, will be grateful.
About the Author
Sam Batkins is Deputy Press Secretary for the 350,000-member National Taxpayers
Union. |
