GREGG REMARKS ON USING CAP-AND-TRADE REVENUES TO BENEFIT AMERICAN TAXPAYERS

Wednesday, May 7, 2008                                                   Contact: Andrea Wuebker/Laena Fallon

GREGG REMARKS ON USING CAP-AND-TRADE REVENUES TO BENEFIT AMERICAN TAXPAYERS

WASHINGTON – U.S. Senator Judd Gregg (R-NH) today made the following statement on the floor of the United States Senate regarding his idea to use revenues created by a Cap-and-Trade system, such as the one proposed in the Lieberman-Warner Climate Security Act, and return these dollars, potentially worth trillions, to American taxpayers in the form of lower and fairer taxes to keep the economy strong. 

Cap-and-Trade legislation is scheduled to be brought to the Senate floor for consideration next month and would cap greenhouse gas emissions for U.S. electric power, transportation, manufacturing, and natural gas sources.  Companies producing or emitting greenhouse gases would now have to acquire allowances to cover each ton of CO2-equivalents they emit or produce.  These companies, especially fuel suppliers and electricity generators, would likely pass their higher costs on to consumers.  Senator Gregg has proposed to take the revenues generated by a Cap-and-Trade system and return them, in part, to taxpayers to help them combat the anticipated increase in energy costs as well as help mitigate the impact this system would have over the entire economy.

Senator Gregg’s Senate Floor Remarks on

Using Cap-and-Trade Revenues to Benefit American Taxpayers

May 7, 2008

(unofficial transcript)

Madam President, I wanted to rise on a separate subject here. This is obviously a key subject, but another subject is coming at us that is even of greater significance in many ways, because it's going to impact the entire structure of the U.S. economy and the lives of everyone, probably, in the United States.  And that's how we get a handle on the issue of global warming and the issue, specifically, of the emissions of toxic materials from plants which generate energy in our country.

The term "cap-and-trade" is applied to a bill that is going to be brought forward on this floor, supposedly in early June. It is a concept, basically, of creating areas where energy companies are required to start to reduce their emissions. But the manner in which they reduce their emissions is tied to the trading of rights of, basically, emissions, and what sort of chemicals can be admitted through a trading process between different regions and within different communities of the emitters.   

In this cap-and-trade proposal, which is known as the Warner-Lieberman bill, represents a huge re-adjustment of our economy. It represents a massive cost to our economy, as well as, hopefully, a massive improvement if it were to work right in the amount of toxic emissions which occur in this country as a result of our production of electricity, specifically.   

The cost of the cap-and-trade program, through the purchasing and selling of allocations of what can be emitted, is estimated to be about $1.2 trillion over the first ten years of the proposal. This cost, obviously, is going to have a major impact on our economy. It's going to have a major impact on the people who consume the electricity because the cost is going to be passed on to the people who use electricity in their homes, primarily, and to businesses.   

There are a lot of issues raised by this bill on the substance of whether cap and trade should work. For example, there are issues of whether the technology necessary to meet the production will be available in time, and issues as to whether or not certain segments of our industrial society are going to be unnecessarily handicapped and, as a result, move jobs offshore. These are big policy issues, but I don't want to address those, I want to address the subject of how the actual cap-and-trade system will work.

I also want to address the issue of the cost to consumers, $1.2 trillion to consumers over ten years. That cost will go on for 40 years, so we are talking trillions of  dollars being passed on to consumers through higher energy costs, which will increase anywhere from $30 to $400 annually.

In any event, the costs are dramatic. It has two effects. One, the federal government will take in a massive amount of income as a result of the costs. Two, the consumers in America, the homeowners, will see their electrical rates go up, which essentially is a tax as a result of the costs.   

The way I conceive of this is the federal government will get a lot of money, a lot of new revenue. What are we going to do with the revenue, is the first question. And second, what about the consumer who pays the new consumption cost through the increase in the price of electricity which is, essentially, a consumption tax.   

Now, the bill itself is being discussed in committee and supposedly is going to be recorded here on to the floor. It would take the $1.2 trillion over that ten-year period and spend it all in a variety of different ways, but a large amount of that spending would involve the expansion of government. It would be a huge infusion of funds into the federal Treasury at the expense of the consumer who pays those funds.

Senator Barack Obama, who is running for president, who appears to be very close to being successful in his quest for the nomination, has suggested that he would pay for an additional $300 billion in new spending annually. He has proposed over $300 billion of new spending annually. He would pay for a large amount of that through generating $30 billion to $50 billion annually in taxes as a result of cap-and-trade. It is estimated by some that revenue to the federal Treasury might exceed that number and actually be up to $100 billion a year annually.

But Senator Obama has already suggested we spend it on the expansion of the federal government. The bill itself proposes that it be spent on the expansion of government as well as on various other initiatives which the bill suggests we should pursue.

I’m on the floor today to suggest a different approach to that. I suggest if we go down the path of cap-and-trade and if we raise over $1 trillion during a ten-year period from consumers, we should return the dollars to consumers in some way. I believe that since we're basically creating a consumption tax and shifting the burden of the government significantly onto the user of electricity, especially the homeowner, they should receive a reduction in taxes. If you are going to shift what amounts to a $1.2 trillion increase in consumption taxes, you ought to use the revenues to reduce income taxes to working Americans by pretty much an equal amount.

I believe if we did that, if we took the revenue from the consumption tax and moved it over and reduced income taxes so that working Americans could benefit from that reduction in their income taxes, you could end up dramatically reducing income tax rates on working persons.

That should be our goal with these dollars. We shouldn't use these dollars to significantly expand the size of the federal government. If we're going to create these brand-new consumption taxes to control emissions that could cause global warming, we should use the revenues to reduce the tax burden on working Americans. This should not be a windfall that expands the size of federal government and expands the size of government. It's not right to do that.

The overall tax burden on the American people is already significant. It's going to grow, regrettably, over the next few years. If you listen to some of our colleagues on the other    side of the aisle, it will grow a lot. The budget that passed this Congress suggested that it would grow over $1 trillion over the next five years. We don't need to throw on top of that increased burden of taxation which Americans are already paying, a brand-new consumption tax where the revenues are taken to expand the federal government. Instead, we should take the revenues and put them toward a reduction of income taxes.

Many people look at our tax policy and argue this is an intelligent way to structure this, to basically begin the shift from an income tax system to a consumption tax system as being a much more efficient way, first, to collect revenues; but, secondly, a better way to collect revenues from the standpoint of energizing a strong and vibrant economy.

But independent of that argument, which has been raging for years -- whether consumption tax makes more sense than an income tax, -- what doesn't make sense is to raise consumption taxes through cap-and-trade and then spend it to increase the size of government. Use that money to reduce the tax rate on working Americans, to reduce the income tax. That should be our goal as we move forward and debate the issue of cap-and-trade and how we're going to use the revenues which that bill will generate.

I appreciate the Senator from Louisiana yielding the floor.