The Problem With Carbon Taxes

President Obama and his administration seem determined to address climate change through carbon taxes.

Climate change is real, but I do think carbon taxes are NOT the way to address climate change.

Carbon Taxes = Higher Prices, More Unemployment

Carbon taxes are an extremely regressive form of taxation. By that I mean poor and middle class people will pay a widely disproportionate percentage of the taxes, especially considering that the carbon tax will be passed on to the general public through higher prices. Also, the less money you make, the greater the percentage of your overall income that will go to pay carbon taxes.

Make no mistake, the money to pay the carbon taxes MUST come from customers. Companies get 100% of their money from customers (that is you and me). They have no other source of money. Even the money a company gets from the government (such as defense contracts, bail outs or even the government simply buying office supplies) comes from the taxes you and I pay. No company has a source of money to pay increased taxes except their customers. All business taxes, including carbon taxes, are ultimately paid for by the consumer.

Increased taxes are usually passed on to the customer through higher prices, but what if the customer cannot afford the higher prices? A company may decide to not raise prices, instead choosing to cut costs. Cost cutting means workers losing retirement benefits, health insurance, or even their jobs (more unemployment).

We are already set up for massive inflation in the near future because of the massive debt and the massive printing of money that our governments have engaged in under the guise of trying to fix the economy. Carbon taxes will only add to the inflationary pressures.

What then , do I suggest:

1- Large- and small-scale reforestation efforts, sustainable forestry measures, greening of the deserts... In other words, to rebuild our planet's lungs.

2- Switch to renewable sources of clean energy - solar (both earth-based and space-based), wind, geothermal , and so forth.

3- Place a major emphasis on dramatically increasing energy efficiency.

4 - Redesign of the transportation system to emphasize rail for long distance transport of goods and people, cleaner burning natural gas for heavy duty vehicles (trucks, buses), electric for cars, and in urban areas walking, biking, car-pooling and public transportation.

Not only is my plan non-inflationary, it has the added benefit of creating a huge number of jobs. Carbon taxes will create a few bookkeeping/accounting jobs, but will have a net negative impact on jobs as companies lay off workers (in addition to raising prices) to balance out their increased taxes.

Good News

There is some really good news in accomplishing these goals. The government has finally realized the importance of building a new smart energy grid that will enable both the switch to renewable energy and the push for greater energy efficiency.

Oil tycoon Boone Pickens has realized that we need to promote alternatives to fossil fuels and is promoting the heck out of that need, raising public awareness and putting pressure on congress for the need of a smart grid. (Click here for an update on the Pickens Plan)

Wind- and solar-energy companies are rapidly growing even during these difficult economic times.

Reforestation projects abound around the world and sustainable forestry measures are being widely adopted.

Momentum is growing. Let's keep up the publicity and the pressure to adopt smart ways to mitigate climate change without destroying the economy and devastating the poor and middle classes.