Mega-billionaire Elon Musk recently tanked the global cryptocurrency market by implying that Tesla may sell its digital currency holdings out of concern that Bitcoin mining is environmentally destructive. Tens of billions of dollars were wiped out of the marketplace overnight, and the immense backlash that followed has put Musk’s views on environmentalism front and center in the energy public policy debate.
For Musk, he’s responded to this increased attention by starting yet another push for a carbon tax.
At this point, much of the public seems to have become used to blocking out Musk’s social media ranting, but this may be a rare instance where everyone should pay close attention. While the world of crypto doesn’t directly affect the daily lives of most average Americans, a carbon tax most certainly would. Should it be imposed, this form of taxation would become the broadest in American history.
Musk claims that he spoke to the Biden administration about implementing this tax, which brushed it off for being “too politically difficult.” That’s good news, and the executive branch must continue to avoid this policy, which would indirectly enrich billionaires like Musk at consumers’ expense.
The carbon tax suffers from the fatal flaw of being unworkable in the real world. And it doesn’t take long to see why.
Simply consider who’s pushing this tax: the very rich like Musk, who stand to benefit financially from its implementation. This should come as no surprise. Musk already has a well-known history of getting billions in tax dollars to keep his car operation afloat and selling carbon credits to rival companies to become profitable. Even his space operation, SpaceX, is funded mainly by government contracts, subsidies, and spending — like the recent near-$1 billion internet contract it received from the Federal Communications Commission. It’s not unreasonable to think that high-profile promoters of the carbon tax see dollar signs, not the public interest.
That’s not to say that the policy doesn’t have any grassroots support. Environmentalists view carbon as an “untaxed externality” — meaning that its impact on the environment isn’t adequately accounted for in the price structure of the marketplace. To remedy this issue, they think that the federal government placing this tax on the carbon exhausted throughout the economy— think factories, vehicles, and natural resource extraction — will ensure that carbon is no longer “overused.”
These proponents argue that companies would better regulate their carbon usage by adequately factoring in environmental costs. But implementing such a broad “reform” is where the idea falls apart. Advocates fail to account for the realities of initiating and maintaining the tax.
Supporters have promised that this so-called “simplified” tax system would reduce other less efficient, burdensome regulations because the tax is designed to replace many complex environmental regulatory solutions currently generating mixed results. But there’s no evidence that our federal system would pursue rollbacks if the tax were passed. Given the current political dynamics of Washington, D.C., it’s hard to believe that it would.
The regulatory state is currently run and operated by people who genuinely believe in the policies they have on the books. They are likely to fight tooth and nail to keep every last word in enforcement. We saw this kind of response in the early days of the Trump administration, with deregulation talk resulting in full-out-rebellion by career regulatory staff.
When met with this pushback, supporters typically argue that even if there are some added regulatory costs from this new tax, large corporations will almost exclusively be the ones to absorb them. At best, this idea of a Main Street-friendly tax is naive idealism.
To suggest that a tax that touches every sector and every product we consume would somehow be unfelt by the general public can’t be supported by any realistic review of burden-sharing in the modern marketplace.
Our economy is too fragile to be attached to the pillows of Washington wonks, dreaming “green dreams” that rob hardworking Americans of the “green” in their wallets. My decade of service on the Ways and Means Committee was guided by the wise counsel of the late Milton Friedman, who famously said, “if you want less of something, tax it.” If the current crowd in charge levies a “carbon tax,” we will have less energy, less investment, and less money in all of our pockets.
This article originally appeared at Real Clear Energy
June 5, 2021