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MONITOR EDITORIAL

Make a carbon tax part of reform effort

Douglas Holtz-Eakin, a conservative Republican, adviser to both presidents Bush and presidential candidate John McCain, believes the world's climate is changing and human activity could be to blame. But that's not what he emphasizes as he tours the country in tandem with environmentalists or the ambassador of Norway, a nation whose capital no longer can count on having enough snow for Nordic skiing. Instead, Holtz-Eakin talks primarily about the many other reasons why Congress should include a tax on carbon emissions as a component of a reform of the nation's absurdly complex tax code.

Holtz-Eakin stopped by the Monitor to make his case last week, and it was convincing. This paper has, for more than two decades, viewed global warming as a profound threat, so we were eager to learn why Holtz-Eakin, an economist and former head of the Congressional Budget Office, was willing to stump the country to build support for a carbon tax. He was, he said, doing so in hopes of providing business with the certainty it needs to grow, invest and create jobs. And he was doing it for the sake of national security. The less the United States has to rely on other nations, including nations whose interests are hostile to our own, for the energy that powers its economy, the more secure it will be.

Holtz-Eakin is a realist. He knows the current political climate is not conducive to action on climate change - or on anything else, we would add. But as one who has been both on top and in the political trenches, he sees an opportunity to act, and we think he's right.

No one, save for tax lawyers, likes the nation's 71,684-page tax code, a monstrosity that's evolved under massive pressure from lobbyists. Reforming the tax code is one of the few things that could win bipartisan agreement, even in an election season.

So far, no climate change bill has emerged from Congress without being burdened by additions and exclusions that doom it to fail. Tax reform legislation, by comparison, is far harder to swell with campaign paybacks, regional favors and other additives. It is a good vehicle, Holtz-Eakin said, on which a clean, revenue neutral, uncertainty-ending tax to combat climate change could ride. We agree.

Society can no longer afford to hide the true cost of burning a fossil fuel by passing it on to an often unwitting populace, whether that cost comes in the form of air pollution, a negative impact on human health, harm to the environment or climate change. A carbon tax is a recognition that those costs are real and should be a component in economic decisions that include whether to invest in a coal-fired power plant or a wind farm.

Holtz-Eakin believes that to pass, a carbon tax would have to be revenue neutral. The money the tax raises should be offset by reductions in things like payroll tax, income tax and corporate tax rate. If some of the money is diverted to another purpose, even one so worthy as energy conservation measures, he believes, it will fail. We hope he's wrong, because using some of the money to, say, subsidize the insulation of homes, would reduce carbon emissions even more, but we suspect he's right. The tax would have to be clean with revenue raised offset by revenue returned to taxpayers.

A carbon tax would reduce America's dependence on foreign oil, replace some environmental regulations with market forces, fuel investment in alternative energy and slow climate change. It should be included in any reform of the tax code.

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