The White House is withholding support for a proposal to impose a carbon border tax as part of Democrats’ $3.5 trillion package filled with wasteful spending and tax increases over concerns that it would violate President Biden’s pledge not to raise taxes on anyone making less than $400,000 per year.
According to recent reporting from Reuters, “the White House is concerned the Democrats’ proposal will raise prices on a host of consumer goods, from cars to appliances, and conflict with Biden’s pledge not to tax any American earning less than $400,000 per year.”
The White House is right to worry about the increased costs a carbon border tax would impose on all American consumers, including those earning less than $400,000. The proposed carbon border tax would be nearly indistinguishable from a tariff, resulting in higher prices for consumers that would be disproportionately felt by poorer Americans forced to spend a larger share of their income on the many everyday products containing imported materials subject to the tax.
While details are still vague, the Democrat proposal would impose a tax on various imported goods including aluminum, cement, iron, steel, natural gas, petroleum, and coal. The level of tax would be dependent upon the level of greenhouse gas emissions from the exporting country. The proposal mirrors legislation introduced by Senator Chris Coons (D-Delaware) earlier this year which was estimated to be a $16 billion annual tax on American consumers and hit 12% of all U.S. imports.
While Democrats message their carbon border tax as a “polluter fee” meant to incentivize the reduction of greenhouse gas emissions from exporting countries, in practice the brunt of the tax would be faced by American consumers paying higher prices for goods. Additionally, as Kyle Pomerleau of the American Enterprise Institute points out, the Democrats’ proposal lacks a rebate on exports – meaning the plan is not a true border adjustment but a tariff – and would not offset the incentive to shift domestic production overseas.
Americans for Tax Reform urges lawmakers and President Biden to oppose Democrats’ proposed carbon border tax.