According to the Congressional Budget Office (CBO), the federal deficit grew by another $181 billion in July, bringing the tab to a record $1.3 trillion total. One might think that for all of its other evils, the Waxman-Markey energy tax legislation would at least manage to help cut the deficit. Not so according to the latest Center for Data Analysis study of Waxman-Markey’s impacts:
Because the Waxman-Markey cap-and-trade tax reduces income, it reduces the revenues collected from other taxes, such as personal and corporate income taxes. And because the revenue collected from Waxman-Markey is spent, the net effect is to increase the national debt. By 2035, Waxman-Markey will have added 9.1 trillion nominal dollars to the national debt, which amounts to an increased tax liability of $12,803 for every American, or a $51,216 liability for a family of four in today’s (2009) dollars.
Other findings from the report:
- A family of four can expect its per-year energy costs to rise by $1,241;
- Including taxes, a family of four will pay an additional $4,609 per year;
- Aggregate GDP losses will be $9.4 trillion;
- Aggregate cap-and-trade energy taxes will be $5.7 trillion; and
- Job losses will be nearly 2.5 million;
You may also have heard from the White house that both the Congressional Budget Office (CBO) and Environmental Protection Agency both produced reports purporting to show that Waxman-Markey would cost Americans only a postage stamp a day. The new CDA report addresses these reports. On the EPA:
First, the EPA employs a technique from the financial world called “discounting” to reduce the value. … Without discounted environmental impacts for comparison, using the technique, here, does little except undercount the cost that families will actually be paying in 2050. Second, the EPA measures consumption, not income. The broadest and best measure of cost is lost income–lost GDP. Consumption only comes after taxes and savings are deducted. Ignoring lost savings and lost payments for government services underestimates the costs by about 40 percent.
Third, the EPA measures cost per household. Households are not necessarily families. One person living alone counts as a household, as do three single people sharing an apartment. The EPA uses the average household size of 2.6 people. Converting from this EPA household size to a family of four adds more than 50 percent to the cost estimate.
So, the EPA’s $174 cost per household is actually above $2,700 (even after adjusting for inflation) when presented as lost income per family of four. This is not a postage stamp per day.
On the CBO report:
The CBO study, on the other hand, does not even attempt a comprehensive measure of lost income and it explicitly states so in footnote 3 of its report. In addition, the CBO study assumes that government expenditure of one dollar is the same as not taxing that dollar. Finally, the CBO created an artificial year (2020 in terms of a 2010 economy), which allows it to project a lower tax cost in the first place because the baseline in 2010 is lower than the baseline in 2020. The CBO’s methodology effectively measures the administration costs of collecting and distributing the allowances rather than the full economic cost.
Analysts from across the ideological spectrum who estimate comprehensive measures of lost income due to Waxman-Markey find costs that are also measured in thousands of dollars per year. The Heritage estimate for lost GDP in 2020 is $161 billion, which translates to nearly $1,900 per family of four. The CRA International study (conducted for the National Black Chamber of Commerce) and a Brookings Institution study both project costs that translate to about $5,000 per family of four.
That last point bears repeating: the Brookings Institutions projects the costs of Waxman-Markey to be about $5,000 per family of four.