MUST READ: Taxing the Other 95%

A must read article from today’s Wall Street Journal explaining why Obama’s cap and trade program is really a hidden tax on the other 95%. Here’s the key passage:

Hit hardest would be the “95% of working families” Mr. Obama keeps mentioning, usually omitting that his no-new-taxes pledge comes with the caveat “unless you use energy.” Putting a price on carbon is regressive by definition because poor and middle-income households spend more of their paychecks on things like gas to drive to work, groceries or home heating.

The Congressional Budget Office — Mr. Orszag’s former roost — estimates that the price hikes from a 15% cut in emissions would cost the average household in the bottom-income quintile about 3.3% of its after-tax income every year. That’s about $680, not including the costs of reduced employment and output. The three middle quintiles would see their paychecks cut between $880 and $1,500, or 2.9% to 2.7% of income. The rich would pay 1.7%. Cap and trade is the ideal policy for every Beltway analyst who thinks the tax code is too progressive (all five of them).

But the greatest inequities are geographic and would be imposed on the parts of the U.S. that rely most on manufacturing or fossil fuels — particularly coal, which generates most power in the Midwest, Southern and Plains states. It’s no coincidence that the liberals most invested in cap and trade — Barbara Boxer, Henry Waxman, Ed Markey — come from California or the Northeast.