Carbon Tax good for Indiana

Indiana needs to reduce greenhouse gas emissions in order to limit the effects of global warming. Accord to a 2004 Energy Information Administration report, Indiana had the sixth highest carbon footprint of any state, and according to American Lung Associations, four of Indiana’s metro areas are listed as having bad smog problems, and one with an ozone pollution problem.

Most power plants in Indiana use coal for fuel. Coal mining has a number of adverse effects on the environment these include air pollution, water pollution, and land pollution. Coal mining releases methane into the air, a potent greenhouse gas, estimated to account for 18% of the overall global warming effect triggered by human activities. It also stirs up dust pollution that can lead to respiratory problems in nearby communities. Coal mining contributes to water pollution in the respect that sulfuric acid forms when coal is exposed to air and water, and can leech into streams, acidifying the water and killing fish, plants, and aquatic animals. In addition, the clearing of trees, plants, and topsoil from mining areas destroys forests and natural wildlife habitats promoting soil erosion and flooding.

To reduce carbon emissions, Indiana needs to implement a carbon tax. This tax offers the promise of cutting environmental cost currently imposed on Hoosiers by polluters, and reducing burdensome taxes on the people. A carbon tax discourages exactly what we think is bad – excess carbon emissions. It makes using dirty fuels more expensive, it encourages utilities, businesses and individuals to reduce consumption and increase energy efficiency. It also encourages investing in environmentally friendly alternative energy sources that can create a new surge of quality job growth while significantly reducing our carbon emissions. Not only will it address the issue of climate change, it will also provide a wealth of well-paying manufacturing jobs – the kinds of jobs that have largely vanished from Indiana in recent years.

A carbon tax in Indiana should be revenue-neutral. First and foremost, tax revenues raised by taxing carbon emissions should be used to expand the earned income tax credit to help mitigate the negative impacts of carbon taxes on low-income families. Second, some of the revenues should be used to reduce income, sales and property taxes. Indiana has a regressive tax system which means lower and middle income families pay a far higher share of their income in taxes than do the wealthy. By reducing state and local taxes on lower and middle income families, it will level the playing field and put more money in their pockets. Finally, some of the revenue from a carbon tax should be used for state children’s health insurance program, low income home energy assistance program, energy renewable energy research and development, and other state programs.

Indiana is overdue for a big step forward in our economic and environmental wisdom. Many jobs in the state are being lost or exported to low-wage countries with insufficient environmental protections. Low- and middle-income families in Indiana pay a far higher share of their income in state and local taxes than do the richest polluters. Taxes ought to be based on people’s ability to pay them. We can start to alleviate both problems by imposing taxes on pollution and shifting tax burdens away from income, property and sales taxes. A well-designed implementation of a carbon tax will accomplish these two goals simultaneously.

Tax Shifting

The time has come to reform our tax systems in ways that strengthens our economy, cleans up our environment, and benefits all members of society. Our current tax system tends to discourage activities most of us believe are good for society; earning income, owing property, purchasing goods, and being employed. But other activities are worth discouraging; air pollution, water pollution, and solid waste disposal. Implementing a tax shifting system is a smart way of improving economic efficiency and human and environmental health.

Tax shifting is about removing taxes on activities society wants to encourage and placing taxes on activities we want to discourage. Tax shifting is not about raising overall taxes. The revenue collected would still be the same, but revenues would come from taxes on activities we want to reduce.

A tax shift can be accomplished by reducing or eliminating property, sales, personal income, and payroll taxes. Or, we can offer incentives for socially beneficial activities. For example, we can give people rebates for purchasing renewable energy products.

At the same time, we can discourage socially harmful activities by taxing or placing a fee on activities that harm the public good. For example, we can place a fee on purchases of inefficient vehicles, a higher sales tax rate on fuel, or higher taxes on solid waste.

A tax shift would use taxes that can work for us rather than against us. They can strengthen our economy and clean up our environment. The power of a tax shift can greatly improve public good instead of work against it, with lasting benefits for our economy, environment and lower-income citizens.