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Republican lawmakers who oppose a carbon tax are usually motivated by a belief that their constituents will get a raw deal. But standard political commentary on carbon taxation focuses on the higher costs for goods such as gasoline and electricity. Looking at who wins and who loses from a revenue-neutral carbon tax — one that also cuts existing taxes on work — yields a very different answer.
Even still, Republicans often suspect that they would end up on the short end of the stick, losing more politically from the carbon tax than they would gain from the tax cut. Our research suggests that these fears are misplaced by showing how a carbon tax could, in fact, help the GOP’s electoral map.
The traditional view of the carbon tax may be an outgrowth of stereotypical assumptions about Republican and Democratic voters. The Republican drives a gas-guzzling truck long distances to earn a modest paycheck. The Democratic voter lives in an urban apartment with a high-paying job and rides mass transit to work. With these caricatures in mind, it is unsurprising that Republican lawmakers are often reluctant to support policies that would increase the cost of energy in order to curb carbon emissions — including even a carbon tax that would fund tax cuts on ordinary income.
To test the hypothesis that Republican-leaning communities would be disproportionately impacted by a revenue-neutral carbon tax, we examined each of the roughly 3,000 counties in the United States. Our research, supported by a grant from the Alliance for Market Solutions, identified the partisan leanings, per-capita income, carbon emissions, and climate change risk of each locality. We then modeled the effect in each county of a $25-per-ton tax on carbon emissions paired with an equal and proportional reduction in income tax rates. Our results refute the stereotyped voter perspective.
We found that most counties would experience a small net change in income (positive or negative) of less than 0.5 percent. Moreover, there is only a weak relationship between the impact of a revenue-neutral carbon tax and a county’s partisan leanings. Counties in Montana, New Jersey, North Dakota, Texas, and Wyoming are among the biggest Republican winners. More broadly, among the counties that are expected to pay less tax, two out of five voters are Republican.
Taking our analysis one step further, we incorporated the benefit from mitigating the expected local impact from carbon emissions, a concept known as the “social cost” of carbon. With this added consideration, our modeling shows additional gains for many communities throughout the South, particularly in Florida, Louisiana, and Texas. Gains in Republican-leaning counties in Arkansas, Maryland, New York, North Carolina, Pennsylvania, South Carolina, Virginia, and Wyoming are evident as well.
The takeaway is that Republican lawmakers should not assume that a tax on carbon paired with offsetting tax cuts would disproportionately or adversely impact their constituents. The average difference between Republican-leaning and Democratic-leaning counties is small — about $100 — for all the scenarios we modeled. These differences are minuscule when compared to the economic costs associated with command-and-control environmental regulations put in place to date.
While there are certainly other important aspects of the debate over a carbon tax, our research demonstrates that concerns over the outsized impact that such a tax would have on Republican jurisdictions are unfounded. This does not, of course, settle the debate, but it does remove one of the hurdles that stands in the way of enacting a market-based, revenue-neutral carbon policy.
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