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Obama’s Energy Tax Hits Louisiana the Hardest

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Candidate Barack Obama promised to give special attention to rebuilding Louisiana while campaigning for the White House. So why is President Obama pushing an energy tax that disproportionately harms the Pelican State?

 Obama’s energy tax is known as a “cap-and-trade” scheme. It works by putting a price on greenhouse gas emissions thought to cause global warming, to encourage Americans to emit fewer of them. However, emissions are an inevitable byproduct of the energy use that drives our economy, so Obama’s plan would constitute a tax on all economic activity. As a new Congressional Budget Office report notes, “by attaching a cost to CO2 emissions, a cap-and-trade program would thus lead to price increases for energy.”

Cap-and-trade is a tax, no matter what Obama wants to call it. So why the wordplay? Politicians are frightened of the electoral consequences of enacting tax increases. Instead, they use rhetorical tricks like “cap-and-trade” to mask their true intentions—and the costs the policies they support would impose.

Starting in 2012, Obama plans on raising $645 billion in revenue over eight years with a cap-and-trade program, although a top administration official told Senate staffers this week that the figure could be as high as $2 trillion.

Not all tax increases are created equal, however, and an energy tax in particular carries social and regional inequities. Louisiana’s unique economic makeup renders it especially vulnerable to Obama’s cap-and-trade scheme.

Traditionally, the Democratic Party has embraced progressive to that redistribute wealth from the rich to the poor, yet Obama’s energy tax is regressive—the burden is heaviest on the poorest, because they spend more on energy, proportional to income.

Eighteen percent of Louisianans live below the poverty line—the second highest proportion of any state in the country. Moreover, per capita residential electricity consumption is relatively high, due to demand for air conditioning during the sweltering summer and the widespread use of electricity for home heating. As such, Obama’s energy tax hits Louisianans the hardest, proportional to income. 

There are regional inequities, too. Cap-and-trade puts a price on greenhouse gas emissions, so naturally, states with higher emissions face a higher burden.

Because it is home to many energy-intensive industries, the Bayou State emits more than all but 10 other states. In fact, Louisiana has the greatest concentration of crude oil refineries, natural gas processing plants and petrochemical production facilities in the Western Hemisphere. Louisiana has the sixth highest levels of per-capita emissions in the country, according to the World Resources Institute.

Obama’s energy tax would hammer Louisianan industries, which would pass along higher production costs to consumers. Demand would plummet, markets would contract, and those businesses would have to shed jobs.

But don’t take my word for it. Last April, Peter R. Orszag, who now serves as the President’s top budget expert, told Congress that, “the higher prices that would result from a cap on CO2 emissions would reduce demand for energy and energy-intensive goods and services and thus create losses…for workers in the sectors of the economy that supply such products.”

Those “sectors of the economy” are found in Louisiana.

It gets worse. The taxes that these industries pay are major contributors to the state’s budget. As their profits shrink, so will the tax base, and social services will suffer.

President Obama needs to come clean with the American people. Rather than claim that his cap-and-trade climate policy would create millions of “green jobs,” he should level with the public about the cost of its proposed “solutions” to climate change.

That cost would come in the form of expensive energy, and that’s something Louisianans need to consider.

William Yeatman is an energy policy analyst at the Competitive Enterprise Institute.