Daily Chart: How Progressive is Cap and Trade, Part Two

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flcikr scott cassidy.png

Yesterday I made a chart that tried to put the burdens of the Waxman-Markey cap and trade bill in context. The share of C&T costs paid by the poorest Americans will be lower than the share of all federal taxes paid by the same group. But the share of C&T costs paid by the wealthiest Americans is also far lower than the group's federal tax share. This means that a unusually high portion of cap and trade's costs fall on middle-income Americans. The top quintile pays $245 a year, but the second highest quintile pays more: $340 a year.

My friend Brad Plumer, who writes TNR's environment blog, took me to task on his Twitter feed: The big point of the CBO analysis shouldn't be how the burden of cap and trade is distributed -- it should be that the burden is negligible. Okay, fair enough. So here's a chart that approaches the cost of cap and trade from a different angle: Not as a percentage of total tax liability, but as a percentage of household income.

This chart has three variables: The percentage of household income spent on energy, the percentage of household pretax income that would be spent on cap and trade under the Waxman-Markey bill, and the percentage of after-tax income that would be devoted to the same cause.
 

cap and trade household spending.png

This is simple: Because low income households spend a relatively large portion of their income on energy, a flat carbon tax or C&T system will impose relatively large costs on low-income households. But what is striking here -- and, I think, what is important to people like Brad -- is that the after-tax costs remain low.

On the other hand, it's still pretty crummy to be in the third or fourth quintile.

One fine-looking refinery, via Scott Cassidy's Flickr photostream. All the data for this chart comes from the CBO. The data on total household energy spending is from a June 2008 report. The other household spending data is from the most recent cost estimate.

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Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism. He was previously a fellow at The Atlantic and an editor at The Guardian. More

Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism, an economics blog that was recently published in book form by Simon and Schuster. He was previously a fellow at The Atlantic and an editor at The Guardian. He is also on Twitter.
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