The controversy centers around a study by MIT professor John Reilly that shows a carbon cap and trade would cost the average American household $3,9000 a year. $800 of that figure comes from, according to Reilly, “the cost to the economy [that] involves all those actions people have to take to reduce their use of fossil fuels or find ways to use them without releasing [Green House Gases].” No one disputes that $800 a year cost. It’s the other $3,100 that Reilly, the St.Pete Times, and CAP want to disappear.
Reilly admits that cap and trade policies would cause energy prices for the average American family to rise by $3,128 a year. Reilly also admits that “Those costs do get passed to consumers and income earners in one way or another.”
But here is where Reilly gets creative. Reilly believes that since those extra energy taxes will be collected and then spent by the government in some way, they should not count as costs to the American family. He told the Weekly Standard:
It is not really a matter of returning it or not, no matter what happens this revenue gets recycled into the economy some way. In that regard, whether the money is specifically returned to households with a check that says “your share of GHG auction revenue”, used to cut someone’s taxes, used to pay for some government services that provide benefit to the public, or simply used to offset the deficit (therefore meaning lower Government debt and lower taxes sometime in the future when that debt comes due) is largely irrelevant in the calculation of the “average” household.
Got that? Anytime the government takes your money, whether it be in the form of an income tax, or payroll tax, or capital gains tax, according to Reilly and CAP, this actually does not cost American taxpayers anything because eventually the government will spend your money on something anyway.
Without this assumption, Reilly admitted to the Standard, “the cost would then be the Republican estimate [$3,128] plus the cost I estimate [$800].”
Read more from The Heritage Foundation at The Foundry