Carbon Dividend Neg - DDI 2023 KM

NEG---KM vs LS Carbon Tax
Off-case
Adv CP
1NC — Advantage CP
The First/Next Off is the Advantage CP
The United States federal government should:
Guarantee a universal basic income
Establish a value added tax (VAT)
Supplement the IRA with sectoral emissions standards, eliminating bureaucratic barriers, and pass a national climate law.
The US should do climate mitigation policy without a dividend.
Kaufman 23 — Noah Kaufman, an economist, served as a Senior Economist at the Council of Economic Advisers under Biden, 2023 (“Should the Inflation Reduction Act End the Dream of a National Carbon Price?,” Columbia Center of Global Energy Policy, Jan 26th, Available Online at https://www.energypolicy.columbia.edu/should-the-inflation-reduction-act-end-the-dream-of-a-national-carbon-price/, Accessed 07-28-23)
Other Policies May Better Address Gaps in the New Federal Climate Strategy
Economists can be proud of their long-standing and unwavering support for a price on carbon dioxide emissions. After all, a carbon price encourages emissions reductions wherever and however they can be achieved at a low cost, while providing revenue for an equitable energy transition. The most successful decarbonization efforts in the world are in Europe,[1] where carbon prices above $50 per ton are central elements of climate policy strategies.[2]
In the United States, a movement for a national carbon price has been alive for decades with a consistent drumbeat of support from not only economists[3] but also members of Congress,[4] advocacy groups,[5] and international organizations.[6] In full disclosure, I contributed my share of fodder.[7]
But when the facts on the ground change, policy strategies should too. With Congress passing a series of laws that amount to the nation’s first climate strategy, long-time supporters of a national carbon price should consider shifting their focus to alternative policies that can better fill the gaps in the current strategy.
Carbon Prices Address Cost Differences Between Clean and Dirty Products. The Inflation Reduction Act Does That Too.
Thanks to the Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law, the United States finally has a credible federal climate policy strategy. These policies may not be anyone’s ideal, but rather what could garner majority votes in Congress. And at first glance, many of the limitations of the current policies—insufficient emissions reductions, a lack of coordination across sectors, inadequate support for vulnerable communities—could be addressed by a carbon price and its associated revenue.
Bill Nye explains carbon pricing on the television show Last Week Tonight.
However, as Bill Nye famously explained to John Oliver (with safety glasses on), the fundamental logic of carbon pricing is to raise prices on carbon-intensive products so that we buy less of them. So, a carbon price is an effective way to reduce emissions when the primary barrier to emissions reductions are the price differences between dirty and clean products. Specifically, prior to the passage of the IRA, the vast majority of the emissions reductions from a carbon price would have come from raising the costs of dirty electricity because of the availability of relatively cheap and clean electricity sources.[8]
The IRA also changes the relative prices of clean and dirty products, just by the opposite means: by making clean energy cheaper. Among many provisions to reduce the costs of clean electricity are payments[9] to prevent the retirement[10] of nuclear power plants, and a production tax credit of around $26 to $32 per megawatt/hour for renewables.[11] In changing the relative price between carbon-free and fossil fuel energy, that subsidy is equivalent to a carbon price of around $70 per metric ton on natural gas and $30 per metric ton on coal, which could cause coal-fired electricity to fall to very low levels by 2030.[12] Moreover, the Rocky Mountain Institute analyzed all of the new fossil fuel electricity plants that are currently being proposed and found that virtually none can be justified as the low-cost option once the IRA subsidies are considered.[13] Forthcoming EPA regulations will make the production of fossil fuel electricity even more expensive, tipping the relative cost scales further in the direction of cheap clean energy.[14]
The higher costs of clean energy may no longer be the most important barrier to emissions reductions in the United States this decade. That does not make a carbon price a bad policy. However, without the promise of large emissions reductions from a carbon price, policymakers are lacking what was the primary justification[15] for a policy that transparently raises the costs of everyday activities like driving cars and heating homes.
Supplement the Current Strategy With a National Climate Law and Targeted Sector-specific Policies
A carbon price is a means to an end—i.e., an efficient, equitable, and coordinated economywide decarbonization policy—not the end itself. Can other policies achieve similar outcomes without the price-hiking-baggage of a national carbon price? With thoughtful policy design and a willingness to accept that perfectly efficient policies are out-of-reach, the answer is almost certainly yes.
Where clean products are already the cheap options, policies can target non-price barriers that impede decarbonization efforts. For example, eliminating bureaucratic barriers to large construction projects has enormous potential to enable a more rapid expansion of clean energy infrastructure that can translate to large emissions reductions (as well as inequities, without careful policy design and implementation).[16] An analysis by Princeton University scholars finds that ensuring sufficient electricity transmission could reduce 2030 US greenhouse gas emissions by around 800 million tons compared to a scenario where transmission continues to be built at its historical pace.
For large emissions sources like vehicles and heating, deep emissions cuts will require a lot of electrification.[17] A carbon price that raises the costs of fossil fuels and electricity is not an effective way to encourage consumers to purchase electric vehicles and electric heat pumps.[18] More effective policies can combine mandates to reduce emissions with the characteristics that make carbon prices so efficient. For example, technology-neutral targets can enable the best solutions to emerge over time as technologies evolve, and the trading of emissions permits can enable the lowest-cost opportunities to reduce emissions to occur first. Along these lines, Colorado is implementing a flexible Clean Heat Standard that requires natural gas utilities to gradually cut emissions by 22% by 2030.[19]
These sector-specific solutions lack a mechanism for coordination across the economy or harmonization with emissions targets. A national climate law, like the United Kingdom’s Climate Change Act, can play that role. The UK’s law combines a binding net zero target, a series of five-year “carbon budgets,” and an iterative and inclusive process of implementing, reviewing, and revising policies to stay on track with its goals.[20] Like committing to high future carbon prices, a national climate law could change the long-term expectations of investors and entrepreneurs by ensuring climate solutions will be profitable in a future low-carbon economy.
A UBI funded by a VAT solves.
Gale 20 – William Gale, Arjay and Frances Miller Chair in Federal Economic Policy and a senior fellow in the Economic Studies program at the Brookings Institution, Former President of the National Tax Association, Former Assistant Professor in the Department of Economics at the University of California, served as a senior economist for the Council of Economic Advisers under President George H.W. Bush, Ph.D. from Stanford University, 2020 (“How a VAT could tax the rich and pay for universal basic income,” Brookings, Jan 30th, Available Online at https://www.brookings.edu/articles/how-a-vat-could-tax-the-rich-and-pay-for-universal-basic-income/, Accessed 07-18-23)
The Congressional Budget Office just projected a series of $1 trillion budget deficits—as far as the eye can see. Narrowing that deficit will require not only spending reductions and economic growth but also new taxes. One solution that I’ve laid out in a new Hamilton Project paper, “Raising Revenue with a Progressive Value-Added Tax,” is a 10 percent Value-Added Tax (VAT) combined with a universal basic income (UBI)—effectively a cash payment to every US household.
The plan would raise substantial net revenue, be very progressive, and be as conducive to economic growth as any other new tax. The VAT would complement, not replace, any new direct taxes on affluent households, such as a wealth tax or capital gains reforms.
A VAT is a national consumption tax—like a retail sales tax but collected in small bits at each stage of production. It raises a lot of revenue without distorting economic choices like saving, investment, or the organizational form of businesses. And it can be easier to administer than retail sales taxes.
An American VAT
The structure of an American VAT should mirror those of the most effective existing VATs around the world. It should be built on a broad consumption base. It should adjust (impose or rebate) taxes at the border so it applies only to goods and services purchased in the US no matter where they are produced. Small businesses should be exempt, though they should be able to choose to join the VAT system. Social Security and means-tested government programs, such as Temporary Assistance to Needy Families, should be adjusted to reflect the after-VAT price of relevant purchases.
Border adjustments are ubiquitous in VATs around the world and do not constitute tariffs. And almost all VAT countries exempt small businesses (somehow defined). Limiting the VAT to firms with more than $200,000 in gross receipts would exempt 43 million small businesses.
Finally, the UBI payment would eliminate the burden of the VAT and give additional resources to low- and moderate-income households. My version would set the UBI at the federal poverty line times the VAT rate (10 percent) times two. For example, a family of four would receive about $5,200 per year. My UBI proposal is similar to, but smaller than, the version proposed by Democratic presidential candidate Andrew Yang.
Effects
A 10 percent VAT would raise about $2.9 trillion over 10 years, or 1.1 percent of Gross Domestic Product, even after covering the cost of the UBI.
As with any tax, its effects on the economy would depend on how government uses the revenue. But all else equal, it would be better for the economy (that is, less distortionary) than hiking income tax rates.
To avoid disrupting the economy in the short run, the VAT proceeds should be used in the early years to stimulate the economy, and the Fed should accommodate the VAT by letting the consumer price level rise.
The Tax Policy Center estimates that the VAT in conjunction with a UBI would be extremely progressive. It would increase after-tax income of the lowest-income 20 percent of households by 17 percent. The tax burden for middle-income people would be unchanged while incomes of the top 1 percent of households would fall by 5.5 percent.
It may seem counter-intuitive, but the VAT functions as a 10 percent tax on existing wealth because future consumption can be financed only with existing wealth or future wages. Unlike a tax imposed on accumulated assets, the VAT’s implicit wealth tax is very difficult to avoid or evade and does not require the valuation of assets.
A VAT also could benefit states. While states would not have to conform to the new federal law, doing so could improve the structure of their consumption taxes, which tend to exempt services and necessities and often tax businesses. Canada’s provinces provide an example of how national and sub-national VATs can “harmonize.”
Politics
One hundred sixty-eight countries have a VAT. But would Congress ever pass one? It may not be so far-fetched., In recent years such a tax (under other names) has been proposed by leading Republicans such as senators Ted Cruz of Texas and Rand Paul of Kentucky, former House Speaker Paul Ryan, and others.
Many years ago, former Treasury Secretary Larry Summers quipped that a VAT has little political support because liberals think it is regressive and conservatives think it is a money machine. He was right.
But liberals should realize that the VAT can be progressive, especially when combined with the UBI. It would be even more progressive if the revenues financed, say, health care or childcare.
There are benefits for conservatives as well. Despite claims to the contrary, there is little evidence that VATs ever increase overall government spending. And in the US, A VAT could be enacted as part of a broader budget agreement that explicitly slows federal spending growth over time.
Ultimately, the real debate will be about how to use the money generated by the VAT. But if new revenues are an inevitable part of any effort to control the federal budget, a VAT with a UBI could be one of the best policy options.
VAT — 2NC/1NR
A VAT won’t hurt the economy at all.
Gale 20 – William Gale, Arjay and Frances Miller Chair in Federal Economic Policy and a senior fellow in the Economic Studies program at the Brookings Institution, Former President of the National Tax Association, Former Assistant Professor in the Department of Economics at the University of California, served as a senior economist for the Council of Economic Advisers under President George H.W. Bush, Ph.D. from Stanford University, 2020 (“How a VAT could tax the rich and pay for universal basic income,” Brookings, Jan 30th, Available Online at https://www.brookings.edu/articles/how-a-vat-could-tax-the-rich-and-pay-for-universal-basic-income/, Accessed 07-18-23)
LONG-RUN EFFICIENCY AND GROWTH
It is hard to think of a tax that could raise as much revenue as a VAT and have better efficiency effects, except perhaps for other forms of a consumption tax. The implicit lump-sum tax on pre-existing wealth (other than housing and durables) is one reason: a one-time tax on existing wealth can raise considerable revenue without economic distortions (Auerbach and Kotlikoff 1987).24 More generally, a VAT that is levied uniformly over time on all noninvestment goods and services has several key attributes. It does not distort relative prices or consumer choices among taxed goods, nor does it affect household saving choices or business investment, organizational, financing, or payout choices. But as with income and payroll taxes, the VAT distorts household labor supply choices because it creates a wedge between what one earns and how much consumption one can afford.
A VAT is designed to operate in an increasingly globalized world. Border adjustability is consistent with world trade agreements and other countries’ practices and would not disrupt the global supply chains that modern corporations rely on. Evidence suggests that the VAT does not reduce trade flows (Benartzi and Tazhitdinova 2018).
The effects of a VAT on long-term economic growth depend, of course, on how the revenues are used, and thus quantitative estimates are beyond the scope of this chapter. One use of revenues is to partially replace the income tax. A large literature has addressed this topic, showing positive but generally small long-run effects, especially once personal exemptions and transition relief are included (see Altig et al. 2001). Huntley, Prisinzano, and Ricco (2019) use the Penn Wharton Budget Model to estimate that a 1 percent VAT, on a base somewhat smaller than that proposed in this chapter, with a refundable tax credit that is substantially smaller than the UBI proposed here, and applied to deficit reduction, would raise GDP by 0.1 percent by 2030 and by 0.8 percent by 2050. More generally, higher tax revenues need not reduce growth: neither time series analysis nor cross-section samples suggest a strong association between tax revenue levels and growth rates.29
VAT Tax solves best – stops circumvention and creates funding
Kate Dore, 21, “The value-added tax brings in billions for other countries, but the U.S. doesn’t have one”, CNBC, 6-21-2021, https://www.cnbc.com/2021/06/21/this-tax-brings-in-billions-worldwide-why-theres-no-vat-in-the-us.html, Wooster FG
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How VAT works
VATs are similar to retail sales taxes, except there’s a levy at each step of the production process, rather than one tax at the end.
For example, let’s say a farmer grows $100 of wheat and sells it to a baker. If there’s a 20% VAT on the sale, the baker pays $120, and the farmer remits $20 to the government. When the baker sells $5 loaves of bread, they tack on an extra $1 per loaf for VAT.
As the baker files their tax return, they will remit the $1 VAT payments on bread and claim a $20 credit for the VAT they paid to the farmer. However, there is no credit for the VAT paid by the consumer.
The VAT system creates a “self-reporting mechanism” where each company documents the activity of another, leading to higher levels of compliance, said Wojciech Kopczuk, an economics professor at Columbia University.
A ‘workhorse’ for other tax systems
Another reason why VATs work so well is the relative stability of the tax base, said Daniel Bunn, vice president for global projects at the Tax Foundation.
“The government is not going to see huge swings in tax revenue from year to year,” he said.
The pandemic, of course, may have been the exception.
“But even in a pandemic, your consumption tax revenue doesn’t swing as widely as income,” Bunn said.
VATs are the third-largest revenue producer for other member countries in the Organisation for Economic Co-operation and Development, behind personal income taxes and levies for social security-type programs, according to a Brookings Institution and Urban-Brookings Tax Policy Center report.
“It’s been a workhorse of the European tax systems,” said Gale.
VATs have also been effective in developing countries because these levies are easier to administer and enforce than income taxes, he added.
Raises money for a UBI with broad support from republicans
William G. Gale, 20, The Arjay and Frances Fearing Miller Chair in Federal Economic Policy, Senior Fellow – Economic Studies, "How a VAT could tax the rich and pay for universal basic income", Brookings, 1-30-2020, https://www.brookings.edu/articles/how-a-vat-could-tax-the-rich-and-pay-for-universal-basic-income/, Wooster FG
The Congressional Budget Office just projected a series of $1 trillion budget deficits—as far as the eye can see. Narrowing that deficit will require not only spending reductions and economic growth but also new taxes. One solution that I’ve laid out in a new Hamilton Project paper, “Raising Revenue with a Progressive Value-Added Tax,” is a 10 percent Value-Added Tax (VAT) combined with a universal basic income (UBI)—effectively a cash payment to every US household.
The plan would raise substantial net revenue, be very progressive, and be as conducive to economic growth as any other new tax. The VAT would complement, not replace, any new direct taxes on affluent households, such as a wealth tax or capital gains reforms.
A VAT is a national consumption tax—like a retail sales tax but collected in small bits at each stage of production. It raises a lot of revenue without distorting economic choices like saving, investment, or the organizational form of businesses. And it can be easier to administer than retail sales taxes.
An American VAT
The structure of an American VAT should mirror those of the most effective existing VATs around the world. It should be built on a bro

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