Will Tax Label Sink Cap-and-Trade?

Waxman PhotoThe Waxman-Markey bill, currently under consideration by several House committees, would impose a huge energy tax on the American people in the name of combating the scientifically unproven global warming threat. The Heritage Foundation estimates the average household will have to pay an extra $1,500 per year for gas and electricity while the Congressional Budget Office (CBO) puts that number at about $1,600.

That is why congressional Democrats and liberal advocates are trying to avoid this unpleasant fact by simply not admitting that the Waxman-Markey bill is a tax increase. They understand that if the public perceives this legislation for what it is – an energy tax – then it will fail.


The Waxman-Markey bill, formally called the American Clean Energy and Security Act and sponsored by Rep. Henry Waxman (D-CA) and Rep. Edward Markey (D-MA), would put a cost on carbon dioxide by imposing a cap on greenhouse gas emissions. As the cap is reduced each year, companies that emit too much carbon dioxide would have to buy an ever-decreasing number of permits from clean energy companies with extra emissions credits. The purpose of the bill is to make the use of fossil fuels increasingly expensive and force companies and individuals to use less energy. Obviously, it is an energy tax. However, Democrats are loath to call it a tax.

When Investor’s Business Daily asked Waxman if his legislation was a tax bill, Waxman replied: “This is a bill that puts a cap or limitation on carbon pollution and it does it in a way that is the most cost-effective. It allows the entrepreneurial spirit of businesses to see the investment opportunities in accomplishing the goal of making us more secure in our national interests and promoting new jobs.”

Notice in that long-winded answer that Waxman did not deny it was a tax increase. He just didn’t answer the question.

However, the CBO does see the Waxman bill as a tax increase and is leaning in the direction of officially scoring it as a revenue generator. CBO Director Douglas Elmendorf wrote, “Allowances in a cap-and-trade program would be valuable financial instruments, so CBO thinks that the creation of allowances by the federal government should be recorded as revenues.”

That doesn’t sit well with advocates of the legislation. John Irons, research and policy director for the liberal Economic Policy Institute, claims, “There are fundamental differences between the impact that a cap-and-trade system would have vs. a tax.” Irons admits that a cap-and-trade system would raise energy costs but insists that still doesn’t make it a de facto tax.

Chad Stone, chief economist for the liberal Center on Budget and Policy Priorities, does not think that the tax issue should even be debated. “Debating whether the charge put on greenhouse gas pollution by a cap-and-trade system should be called a tax or something else is a politically charged semantic exercise that does nothing to advance the policy debate,” said Stone.

It is understandable why Waxman, Stone and company want to dodge the tax issues in the cap-and-trade bill. They know that if the public realizes just how much their energy bills would soar, then they will turn their wrath on its congressional supporters. Rep. Steve Buyer (R-IN) goes so far as to say that many Democratic congressmen “are scared to death of this bill.” While it would be easy to dismiss this statement as partisan hyperbole, the statements of several Democratic congressmen prove this to be the case.

Michigan Congressman John Dingell, former Chairman of the Energy and Commerce Committee, bluntly stated at an April 24 hearing: “Nobody in this country realizes that cap-and-trade is a tax, and it’s a great big one.”

The fact that the bill was sent to the House Ways and Means Committee, the committee charged with overseeing tax-related legislation, is an admission in itself that Waxman-Markey is a tax increase. Committee Chairman and serial tax dodger Charles Rangel (D-NY) said in an understated way, “There are tax provisions within the bill.”

Rep. Mike Doyle (D-PA), a critic of the bill, said people are correct to see Waxman-Markey as a tax because there are “huge tax implications.” Doyle added, “It is a perception that the public certainly understands. The question is, how widespread is that perception?”

Indeed, the extent to which the public views Waxman-Markey as a tax increase is what will probably make or break the legislation. Recent polls indicate a growing number of people are coming to see climate change legislation as an energy tax.

The National Rural Electric Cooperative Association released a poll in April that found that 37 percent of respondents “say climate change legislation will cause rates to go up a lot.” In a 2007 association poll, only 26 percent anticipated a hike in energy costs.

This poll’s findings make it clear why Democrats are desperate to ram through the Waxman-Markey bill by ignoring or glossing over its tax increases. In addition, the poll results represent a stinging public rebuke of the Democrats’ overall global warming agenda.

Fifty-five percent of all respondents and 69 percent of working-class families say a $20 increase in their monthly electric bill would cause them financial difficulty. A $50 increase would cause hardship for 78 percent of all respondents. The Heritage Foundation estimates that electricity rates would soar 90 percent if Waxman-Markey is enacted.

One of the most interesting poll results – and for environmentalists, the most disturbing – is that “58 percent of respondents say they are unwilling to pay any more than they currently pay for electricity to combat climate change.” That is a major increase since 2007 when 23 percent expressed an unwillingness to pay more to fight global warming.

In fact, global warming and the environment rank at the bottom of voter concerns. The poll found that the number of respondents ranking those issues as a priority fell from 8 percent in 2007 to a lowly 3 percent in 2009. Not surprisingly, the economy and jobs are respondents’ top concerns.

It is no wonder, then, that Democrats are “running scared” on the Waxman-Markey bill. The American people are adamantly opposed to paying steeper prices for electricity and gas to fight a scientifically-unproven global warming threat that most people simply are not concerned about.

Liberal activists understand it is imperative that Waxman-Markey not be branded as a tax increase. In an April 17 fundraising e-mail, Adam Ruben of MoveOn.org wrote, “If Republicans convince voters that clean energy legislation amounts to a new tax, Obama’s plan is toast.”

Clearly, free-market advocates can defeat Waxman-Markey by relentlessly hammering at the bill’s huge tax increases. In this fight, the facts and the principles are on their side.