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

By Conor Clarke

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.

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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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