Mises Wire

Dear Gary Johnson, There Is No “Free-Market” Carbon Tax

There are few things less popular in American politics than raising taxes, which is why there is a longstanding tradition of American politicians finding ways to avoid using the “t” word.

While it’s not surprising to see these sorts of political shenanigans from two parties that have a history of using Orwellian word games to grow government (like the charmingly named Patriot Act), it’s extremely unfortunate to see Libertarian Party nominee Gary Johnson resorting to the same tactics.

During an interview with the Juneau Empire, Gary Johnson was asked his opinions on climate change:

“I do believe that climate change is occurring. I do believe that it is man-caused,” Johnson said.

To address climate change, Johnson said he believes “that there can be and is a free-market approach to climate change.” That would include a fee — not a tax, he said — placed on carbon. Such a fee would make pollutants bear a market cost.

What’s interesting is that while Gary Johnson tried to distance himself from calling his proposal a tax when talking with a newspaper in the “red state” of Alaska, he was more honest when discussing the idea in an editorial newsroom that looks more favorably on taxes, the Los Angeles Times. Along with crediting the free-market, and not the regulations of the Obama administration, with the decline of the American coal industry, Governor Johnson said he was “open also to the notion of a carbon tax. That it does have an impact, that it ends up being revenue-neutral.”

While it’s nice of Gary Johnson to not want to grow the government coffers with a carbon tax, unfortunately that detail doesn’t make this proposal any less concerning, nor any more “free-market.”

After all, it is impossible for a president or legislature to impose a “free-market” tax (or fee) on anything. Considering the explicit goal here would be an attempt to try to use government tax collectors to alter the behavior of carbon-dioxide emitters, it’s difficult to see this as anything but government intervention. Though this pattern of confusing intervention with the free market might also explain why Gary Johnson frequently credits the free market, and not the Obama administration’s regulatory burdens, for the decline of the American coal industry.

Johnson also tries to follow the common trick used by some “conservative” carbon tax advocates by describing their tax as a “price on carbon.” In his interview with the Juneau Empire, Gary Johnson describes his proposal as a “market cost.” Of course calling an arbitrary government-imposed penalty on carbon emission a “market cost” is as disingenuous as not calling such a plan a “tax.” As Dr. David Henderson pointed out in responding to such rhetorical games:

[C]arbon already has a price, or, more exactly, multiple prices. Natural gas has a price; oil has a price; coal has a price. And their prices are related to the valuable carbon component of those fuels because it’s carbon that makes those fuels valuable. Just as there’s no such thing as a free lunch, carbon is not free.

In his defense, Governor Johnson admits that he isn’t up on the finer details of what he envisions in a carbon tax, telling the LA Times, “I have really just come on board with recognizing that there are a lot of people that are embracing this, that I value their opinion.”

With that being the case, I’d suggest Gary Johnson listen less to “free market” economists like Greg Mankiw, and instead look into the work of people like our own Robert Murphy. Not only has Murphy outlined the dangers implicit with entrusting government to combat climate change, but has illustrated the specific fallacies embedded with the very idea of a revenue neutral-carbon tax:

Proponents of a carbon tax swap deal are right when they claim that the gross harms of a new carbon tax can be partially offset if its receipts are used to reduce other taxes. However, they typically leap from this true claim to the unjustified conclusion that a revenue-neutral carbon tax will be a “win-win” for the economy — by reducing distortions from the tax code as well as providing environmental benefits. On the contrary, it is theoretically possible and empirically likely that a revenue-neutral carbon tax will impose more deadweight loss on the economy, offsetting at least some of the potential environmental benefits.

And in case if Gary Johnson would like to further brush up on what real free market solutions look like, most of the Mises U 2016 lectures are now available on Youtube and SoundCloud.

Tho Bishop directs the Mises Institute’s social media marketing (e.g., twitter, facebook, instagram), and can assist with questions from the press. Contact: email; twitter; facebook.

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Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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