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White House Explores Two New Tax Ideas — A Value-Added Tax and Carbon Tax — As Leading Proposal to Raise Revenue Falters
by Damian Paletta and Max Ehrenfreund (Washington Post) ... But many economists view a VAT as a tax that disproportionately hurts lower-income workers, who typically benefit from a progressive income-tax system.
A carbon tax would target the emissions of carbon dioxide and other greenhouses gases in the burning of gasoline, coal and other fossil fuels. Many Democrats support the creation of a carbon tax as a way to address climate change, but they couldn’t even reach an agreement on the issue when they had control of Congress and the White House during the early years of the Obama administration.
The carbon tax idea is very controversial within the administration, and some officials strongly oppose it, one person said.
A value-added tax and a carbon tax have long been favored tools among many economists, including some on the right, to raise revenue in a way that supports economic growth.
The chance of Congress passing a carbon tax might not be much better, especially since any tax on emissions that cause global warming would draw opposition from the fossil-fuel industry. All the same, a carbon tax also has some support from prominent Republicans.
A group of veteran GOP officials including James A. Baker, Henry Paulson and George P. Schultz – all of whom served as treasury secretary under Republican presidents – met with White House staff in February to advocate a national tax on carbon.
“I really don’t know the extent to which it is man-made, and I don’t think anybody can tell you with certainty that it’s all man-made,” Baker said in an interview with The Washington Post at the time, referring to climate change. He added, though, that the country needed to protect itself from the serious risks involved in global warming.
In 2013, the nonpartisan Congressional Budget Office projected that a modest tax of $20 per ton of carbon dioxide emissions would raise roughly $1.2 trillion over a decade -- roughly the same amount that would be raised by the border adjustment. READ MORE