Shultz and Becker Urge Revenue-Neutral Carbon Tax

Former Secretary of State George Shultz and Nobel laureate economist Gary Becker take to the pages of the WSJ to urge a revenue-neutral carbon tax.

we propose a measure that could go a long way toward leveling the playing field: a revenue-neutral tax on carbon, a major pollutant. A carbon tax would encourage producers and consumers to shift toward energy sources that emit less carbon—such as toward gas-fired power plants and away from coal-fired plants—and generate greater demand for electric and flex-fuel cars and lesser demand for conventional gasoline-powered cars.

We argue for revenue neutrality on the grounds that this tax should be exclusively for the purpose of leveling the playing field, not for financing some other government programs or for expanding the government sector. And revenue neutrality means that it will not have fiscal drag on economic growth.

They recommend that revenue neutrality be achieved by fully rebating proceeds from the tax, and doing so in the most direct and transparent way possible — both good ideas. Their piece also urges the elimination of loan guarantees and other attempts by the federal government to play venture capitalist in the energy sector. Now if only they’d endorse prizes too.