Colorado governor’s carbon tax idea could cost over $42 a gallon at pump, analysis finds

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(Image by Rheo from Pixabay)
(Image by Rheo from Pixabay)

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[Editor’s note: This story originally was published by The Daily Signal.]

By Fred Lucas
The Daily Signal

Colorado Gov. Jared Polis, a Democrat, has gained national acclaim from some center-right pundits for proposing elimination of his state’s income tax.

However, the Colorado Constitution requires a balanced budget, and the governor has proposed only an undefined carbon or pollution tax to fill the $12 billion revenue hole, which could lead to paying more than $40 per gallon at the pump, according to an analysis from the Denver-based Independence Institute.

The governor has never called for reducing the scope of government in the state, Ben Murrey, director of the Fiscal Policy Center at the Independence Institute and author of the paper, told The Daily Signal.

“We celebrate doing away with the income tax. But the governor doesn’t have a way to replace the revenue,” Murrey said.

Polis first floated the idea last year that the state’s income tax “should be zero.” That would put Colorado in line with nine other states with no income tax.

“When you tax something you penalize it,” Polis said, adding: “We can find another way to generate the revenue that doesn’t discourage productivity and growth and you absolutely can, and we should.”

Asked this month in an interview with Colorado Public Radio how he would replace the revenue, Polis responded: “I’m not talking about making government smaller or making government bigger. I’m just talking about how we can get the revenue we need to function, support our schools, support our prisons, support law enforcement.”

In the same interview, Polis said:

I would look at replacing income tax, I consider [income] positive, we shouldn’t penalize it, with taxing something that’s negative, like pollution, emissions and carbon. So if we can move to revenue neutral, not making the government bigger, not making government smaller, just funding what we need in a way that supports the growth of business, supports individuals earning income, and instead penalizes things that we all agree are negative like pollution and carbon emissions.

Polis’s press office did not respond to multiple requests for comment for this story.

Polis previously said: “Here in Colorado, we have decreased the income tax twice—what do you replace that revenue with? I’m open to a wide variety of ideas, but generally they fall in three main categories. One is some kind of pollution or carbon tax, which has the added benefit of helping to save the planet—what a great idea.”

For a carbon tax to replace the income tax revenue would ask a lot from consumers, according to the Independence Institute.

“For the sake of analysis—and for lack of a more detailed carbon tax plan from Polis—considering a carbon tax on gasoline provides a useful picture of the effect Polis’s plan might have on Colorado’s economy … the state would need to impose a $42.33 per gallon carbon tax on gasoline to make Polis’s income tax elimination proposal revenue neutral to the state,” Independence Institute’s analysis says.

The analysis adds:

The purpose of a tax on carbon or pollution is, in part, to discourage emissions in the state. Polis affirmed this intent. …

If the tax succeeds at this goal entirely, then no emissions would be left to tax, and the elimination of the income tax would no longer be revenue neutral. This presents a glaring problem with Polis’s plan to eliminate the income tax in a revenue-neutral manner.

Still, Polis gained praise from some right-leaning commentators.

Nick Gillespie of Reason magazine wrote: “Colorado’s Jared Polis might be the most libertarian governor in America.” George Will also wrote favorably about Polis, as did Patrick Gleason in Forbes magazine.

However, the Independence Institute report contends that Polis’ policy aims to appeal to two separate political interests, without a realistic plan to implement it.

“Rather than outlining serious and thorough policy plans for voters to evaluate, Polis’s rhetoric on zero income tax—and carbon taxes—appears only to serve the purpose of courting political audiences,” the report says, adding:

By suggesting an elimination of the state income tax, Polis appeals to voters concerned about job creation and economic growth—particularly voters with right-leaning political views. By suggesting a tax to discourage carbon emissions and pollution, he appeals to voters concerned about climate change and the environment—particularly those on the left politically. He does not, however, provide a practicable plan [to] accomplish either goal.

Eliminating the state income tax could be a great move, but replacing it with a carbon tax would be a disaster, said Preston Brashers, a senior policy analyst focusing on tax policy at The Heritage Foundation. (The Daily Signal is Heritage’s multimedia news organization.)

Taxes exist to raise revenue for necessary government functions, Brashers said, and “if the goal is to eliminate the thing you’re taxing, you’re doing it wrong.” He told The Daily Signal:

States like Florida, Texas, and South Dakota with zero income taxes have thrived, so it would be great if Colorado also moved to zero income tax in a way that’s fiscally prudent. But simply replacing the income tax with a carbon tax would be a disaster. The purpose of taxes is to raise revenue for necessary government functions. If your environmental goals involve eliminating your main tax base, you’re going to have problems.

[Editor’s note: This story originally was published by The Daily Signal.]


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