Dems and conservatives alike want to help Trump cut taxes — by charging carbon polluters

Key Points
  • Democrats and a bipartisan group are pushing similar plans to impose a cost on carbon polluters.
  • The charge would raise money to help fund a cut to the top corporate tax rate, a key Republican goal.
  • Parts of the plans align with President Trump's agenda, but he has also vowed to revive the ailing coal industry.
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Democrats and conservatives alike say they can help President Donald Trump cut corporate taxes and put money in the pockets of American taxpayers, but it will come at a price: penalizing coal miners and fossil fuel interests for contributing to global warming.

A pair of Democratic senators and the bipartisan Climate Leadership Council aim to make a fee on carbon emissions part of tax reform. Their plans would essentially transfer money from greenhouse gas polluters to individual and corporate taxpayers.

The goal of a carbon tax is to reduce the use of goods and services that produce greenhouse gas emissions, and to convince companies to reduce their emissions. That would be a hard pill for Trump to swallow, given his pledge to revive the coal industry and put miners back to work.

Senator Schatz and I extend an open hand and olive limb. Find Senator Schatz and me a Republican to negotiate with. Then let's talk about the economics. Let's talk about the revenue.
Sen. Sheldon Whitehouse

Jill Sigal, executive vice president at the Climate Leadership Council, says she understands Republican control of Congress and White House comments on climate change make a carbon charge a tough sell. However, she said the council is prepared to push its plan on its merits and will not give up.

"We believe that we have a proposal that is a climate solution that is beneficial to the U.S. economy and national security," said Sigal, former assistant secretary of Energy for congressional and intergovernmental affairs under President George W. Bush.

Trump on Wednesday kicked off the tax reform push at a campaign-style event in Missouri, though Congress will hammer out the specifics. Following the GOP's failed months-long effort to repeal and replace the Affordable Care Act, many believe the president and Republican lawmakers need a win.

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Republicans need a way to pay for tax cuts, and they've already rejected a plan to tax imported goods at the U.S. border. Failing to kill taxes tied to Obamacare also made tax reform harder. They cannot simply cut spending, because most of the federal budget goes toward Social Security, Medicare and other mandatory payouts.

Congress has not truly reformed taxes since 1986, and it took a bipartisan effort to do so. Many expect Republicans to get no further than a tax cut this time around.

So it would seem impossible to ignore a single proposal that could drive down the top corporate tax rate from 35 percent to 29 percent — especially when Trump wants it to fall to 15 percent. That is what Democratic Sens. Sheldon Whitehouse of Rhode Island and Brian Schatz of Hawaii say their American Opportunity Carbon Fee Act of 2017 could do.

The legislation would establish a charge of $49 for each ton of carbon dioxide emitted by companies responsible for planet-warming activity. That fee would increase 2 percent every year until emissions fall to 80 percent below 2005 levels.

The carbon tax contains provisions that would potentially be popular with businesses and individual taxpayers and align with some of Trump's other priorities.

The bill's creators say their plan would raise $2.1 trillion over 10 years, part of which would go toward reducing corporate taxes. It would also underwrite a $900 billion refund for American taxpayers, equal to a $550 tax credit for individuals and $1,100 for couples.

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The remaining revenue would fund $500 billion in matching benefits for Social Security recipients, veteran's programs beneficiaries and other retirees. The last $100 billion would go toward block grants to fund benefits for miners in coal country or coastal protection in seaside areas.

It's uncertain whether a benefits program for miners would appeal to Trump. Against strong evidence to the contrary, Trump has long argued that the coal industry can stage a comeback. Instead of devising a safety net for miners, he has put his efforts into promoting U.S. coal exports and repealing Obama-era regulations.

The Climate Leadership Council's plan is similar, but would pay all carbon tax revenue directly to Americans. They suggest a monthly dividend that would add up to about $2,000 in the first year for a family of four. Authors on the study, "The Conservative Case for Carbon Dividends," include Republican former Cabinet members James Baker III and George Shultz.

They put forward a starting fee on companies of $40 per ton of carbon dioxide emitted and include measures to further cut regulations.

Many businesses support a carbon tax, at least in part because it offers clarity on the costs they will face in the future. Major multinational companies, including Exxon Mobil, BP and General Motors, are members of the Climate Leadership Council.

Whitehouse told the conservative American Enterprise Institute he was open to reviewing rules that could become unnecessary if Congress passes a carbon tax.

"Senator Schatz and I extend an open hand and olive limb. Find Senator Schatz and me a Republican to negotiate with. Then let's talk about the economics. Let's talk about the revenue," he said.

Both plans would impose a cost on energy-intensive goods — those that cause pollution in the process of being manufactured — when they're imported from countries that do not put a price on carbon emissions, or have weak systems. That potentially plays into Trump's tendency toward protectionist policies.

Baker and others presented the plan in February to Gary Cohn, the director of the National Economic Council, who is taking the lead on Trump's tax effort along with Treasury Secretary Steven Mnuchin. The Climate Leadership Council has scheduled meetings on Capitol Hill to push its plan, according to Sigal.

Whitehouse and Schatz also plan this fall to highlight the potential of a carbon fee to lower tax rates without "exploding the deficit," said Rich Davidson, deputy communications director for Whitehouse.

"When the carbon fee crosses a threshold of real possibility, it will attract support from groups that will enjoy lower rates, as well as those who see it as a last best hope against climate calamity," he told CNBC.