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.

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