Chinese President Xi Jinping

Republicans pushing for tax hike? Midterm elections in jeopardy if GOP joins Democrats in carbon tax

Republicans are rightly making inflation — especially at the gas pump — a big issue for the election year. So it will be shocking news for Americans struggling with soaring prices to learn that a handful of GOP senators are working with left-leaning Democrats to compound their pain.

Specifically, these Republicans are working with Senate Democrats to develop what they call a Carbon Border Adjustment Tax (CBAT) that would be applied to certain imported products that require fossil fuels in their production.

The tax would affect fertilizers, glass, petroleum, iron, coal, steel, pulp, aluminum and other materials needed for agricultural, manufacturing and consumer products.

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This massive new energy tax would result in higher costs for, well, just about everything for American consumers and businesses. It would be another blow to family and business budgets.

It’s basic: by making fertilizers more expensive for farmers and raw materials for industrialists, the CBAT will aggravate inflation. Energy and high-tech expert Mark Mills of the Manhattan Institute rightly observes, “Any carbon tax would be inflationary, which means this latest proposal couldn’t come at a worse time.”

This was echoed by University of Chicago professor David Weisbach, an expert on carbon border taxes, who said it would “unquestionably” raise prices for US consumers.

Here’s another boost for consumers, farmers, and businesses: If passed, these new taxes, or “tariffs,” on imported goods and raw materials needed for domestic manufacturing and agriculture will induce foreign suppliers for sale to other countries. Lower pre-tax prices will mean more sales for them.

The amount of the charge would be calculated on the amount of carbon dioxide emissions emitted country by country.

Such diversion will mean more shortages — and higher prices for U.S. growers — further worsening the plight of farmers and manufacturers.

The amount of the charge would be calculated on the amount of carbon dioxide emissions emitted country by country. In other words, the more emissions emitted in a country for the manufacture of a particular product, the higher the tax on imports from that country.

Of course, estimating the emissions that go into the production of particular products on a national-by-nation basis is fraught with complexity. Does anyone believe that countries like China and India, which want to sell raw materials to American manufacturers, will bluntly provide data that could drive up the cost of their products? It’s silly.

Chinese President Xi Jinping

Chinese President Xi Jinping arrives for a dinner in Beijing, Sept. 30, 2019. (AP Photo/Andy Wong)

Our global trading partners will surely retaliate with restrictions and taxes on other American goods and services. Such a tax would likely not be World Trade Organization (WTO) compliant based on the rules we previously worked to establish.

So why tax? Liberal politicians in Washington always want more money; they like the new taxes. But they know that applying a big new energy tax directly to consumers, farmers and manufacturers amid Biden-induced inflation would be election suicide.

Instead, the tax is designed so that American businesses are forced to build the cost into higher prices for their goods and services. It wouldn’t be manifest as a sales tax. Politicians hope that consumers won’t blame them.

President Biden talks about gas prices before leaving Los Angeles

President Biden speaks with reporters before boarding Air Force One at Los Angeles International Airport, June 11, 2022. (AP Photo/Evan Vucci/AP Newsroom)

They also believe that giving this new tax a soft, climate-friendly name will also give them cover.

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Some Republicans think it’s a good way to appear eco-friendly, even if it comes at the cost of encouraging inflation.

And make no mistake about the extra charges. Farmers can painfully witness what has happened to fertilizer prices, thanks in large part to costly import taxes on the materials needed to produce them.

Farmer in Pennsylvania

A farmer spreads fertilizer on his field near Spangsville, Oley Township, Pennsylvania, April 14, 2018. (Harold Hoch/MediaNews Group/Reading Eagle via Getty Images)/Getty Images)

Government officials knew full well that the United States was not producing enough relevant inputs like the phosphates needed for fertilizers, but Washington issued protective tariffs anyway. No wonder foreign procedures, which farmers here once relied on, are diverting produce to other countries and US prices are skyrocketing.

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I wrote in 2017 about the horror of a previous so-called Border Adjustment Tax when a handful of Republicans proposed the idea that year as well. It was a terrible idea then and it is even more so today given the inflationary pain that Americans are suffering.

The GOP should not play left-handed on such a tax now or in the future. It would make them seem as disconnected as the liberal elites in power in Washington today.

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