The Largest Tax Increase in US History?

Whenever a crisis develops, Congress always over-reacts.  When the Enron bankruptcy became news in 2001, Congress gave us Sarbanes-Oxley, the most expensive securities legislation in history.  The recent subprime lending scandal has encouraged Congress to propose a plethora of new costly regulations on the banking and mortgage business. 
And now following the hysteria over global warming, Senators Joseph Lieberman (I-Conn.) and John Warner (R-Virg.) have introduced S-2191 bill, America’s Climate Security Act of 2007, popularly referred to as the Lieberman-Warner bill. 
Senator Lieberman has estimated the bill would reduce overall U.S. greenhouse gas emissions by up to 63% by 2050.  The bill states as its purpose: “Prompt, decisive action is critical, since global warming pollutants can persist in the atmosphere for more than a century.”
Never mind that air pollution has been steadily declining in the US, and that pollution is a far more serious problem in China, India, and other developing countries.  China has surpassed the United States as the largest emitter of greenhouse gases and its emissions growth is currently several times larger than the emissions growth of the United States.
Never mind that the Lieberman-Warner bill is unlikely to change the average temperature in the US by any significant amount.
Largest Tax INCREASE in History?
But what the bill will do for sure is significantly slow down the U.S. economy and increase the cost of energy and consumer products, disrupt international commerce, and impose the largest tax increase in history. 
The bill aims to cut emissions drastically by creating a “cap and trade” emissions trading system that would permit companies that emit fewer greenhouse gases than they are allowed to sell the excess portion to companies that exceed their allowances.  Cap and trade has been fairly successful in Europe in reducing pollution, and I wrote favorably about this “market” solution in my new book, “EconoPower:  How a New Generation of Economists is Transforming the World” (Wiley, 2008).
However, cap and trade can be abused if done improperly.  The Lieberman- Warner bill is, in my opinion, an enormous wealth redistribution scheme.

The bill estimates that $3.2 trillion (yes, trillion) will be raised by 2050 from the cap and trade auctions. 
Who gets this $3.2 trillion windfall?  The bill envisions that $802 billion will go to relief for low income tax payers, $190 billion to training for “green collar” jobs, $288 billion for “wildlife adaptation”, $342 billion for “international aid” and so on.
What’s the cost?  The Environmental Protection Agency concludes that the would reduce GDP by $1 trillion to $2.8 trillion by 2050.
As an economist, I see very little benefit and much cost to the Lieberman-Warner “global warming” bill. 
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