Dingell unveils draft of gas tax
Diesel would get break from proposed increase
September 27, 2007
BY JUSTIN HYDE
WASHINGTON -- U.S. Rep. John Dingell says his proposed plan for curbing greenhouse gases through higher taxes will likely include a "cap and trade" system for controlling carbon dioxide favored by several other lawmakers, and could give Detroit automakers an opening to sell more diesel-powered vehicles.
The Dearborn Democrat unveiled a draft outline of his proposal on his Web site today calling for a 50-cent-per-gallon increase in gasoline taxes and a $50-per-ton levy on carbon emissions from fossil fuels -- taxes that would likely generate hundreds of billions of dollars per year -- as well as a reduction in the tax deduction for home mortgage interest on houses larger than 3,000 square feet.
In an interview Wednesday, Dingell said he would likely make significant changes to his plan before he introduces a bill in Congress based on feedback from constituents, who can offer comments on the Web site. He also acknowledged the unpopularity of any tax increase among his colleagues in Congress, but said the problems of global warming will require tough choices.
"A carbon tax is going to carry with it a lot of pain," Dingell said. "Something's got to be done, and the only way it can be done is by conservation, forcing a change in people's attitudes and a change in the way the business of the nation is done. ... Changing the economic and personal incentives are the way you do that."
Many policy experts maintain that carbon taxes would be the most effective way to reduce U.S. demand for energy and emissions of greenhouse gases. But as Dingell noted, an earlier effort by President Bill Clinton to pass a carbon tax has been cited by many Democrats as the key reason the party lost its majority in the U.S. House in 1994.
While several lawmakers have proposed a cap and trade system -- where emission limits and credits are divided among polluters and traded on an open market -- Dingell has said those plans tend to be unwieldy and not as effective, noting that a system in Europe has failed to meet its goals.
The outline of Dingell's proposal calls for the carbon and gasoline taxes to be phased in over five years and be adjusted for inflation once in place. The tax deduction on mortgage interest would be cut based on a home's size, with the deduction eliminated for homes larger than 4,200 square feet.
Under his plan, the 50-cent-a-gallon fuel tax would not apply to biofuels or diesel fuel. A similar tax break has made diesel-powered vehicles the majority of new models sold in Europe every year, and Dingell said the up to 25% improvement in fuel economy from a diesel engine warranted an exclusion.
Such a tax increase by itself could have a severe impact on Detroit automakers, as car buyers shifted away from larger trucks to smaller vehicles that foreign automakers specialize in or gave up driving altogether. Charles Chesbrough, senior economist with industry forecaster CSM Worldwide, said that one automaker had estimated a 50-cent gas tax would cut the industry's annual sales by 400,000 vehicles.
By excluding diesels, the plan would give Detroit incentives to keep selling its more-profitable SUVs and pickups. All Detroit automakers are already planning to expand their diesel truck models in light of tougher fuel economy rules.
"People opting to stick with a larger vehicle would certainly choose a diesel," he said. "It would have an impact in the marketplace."
While the proposal calls for the revenue to be spent on a variety of programs, from expanded low-income tax credits to shoring up Social Security and Medicare, Dingell said he would make the final bill as "revenue-neutral as possible."
He declined to estimate when he might introduce a bill, but said the exercise was meant as a sincere effort to create a law that controls greenhouse gas emissions.
"My job is to put together something that will pass, not something that is ideal," he said.
Contact JUSTIN HYDE at 202-906-8204 or jhyde@freepress.com.
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