NCPA - National Center for Policy Analysis


September 17, 2009

A previously unreleased analysis prepared by the U.S. Department of Treasury says the total in new taxes resulting from the cap and trade law would be between $100 billion to $200 billion a year.   At the upper end of the administration's estimate, the cost per American household would be an extra $1,761 a year, according to Decian McCullagh, a correspondent with

A second memorandum, which was prepared for Obama's transition team after the November election, says this about climate change policies: "Economic costs will likely be on the order of 1 percent of gross domestic product (GDP), making them equal in scale to all existing environmental regulation."

The House of Representatives approved the law by a narrow margin in June, but the bill is bound to face significant opposition in the Senate.   The author sited the heavy cost as one reason the bill faces an uncertain future:

  • House Republican Leader John Boehner has estimated the additional tax bill would be at $366 billion a year, or $3,100 a year per family.
  • Democrats have pointed to estimates from John Reilly of the Massachusetts Institute of Technology, who put the cost at $800 a year per family, and noted that tax credits to low income households could offset part of the bite.
  • The Heritage Foundation says that, by 2035, "the typical family of four will see its direct energy costs rise by over $1,500 per year."

The documents, obtained under the Freedom of Information Act by the Competitive Enterprise Institute, also say: "Given the administration's proposal to auction all emission allowances, a cap-and-trade program could generate federal receipts on the order of $100 to $200 billion annually."  Because personal income tax revenues bring in around $1.37 trillion a year, a $200 billion additional tax would be the equivalent of a 15 percent increase a year.  A $100 billion additional tax would represent a 7 or 8 percent increase a year.

Source: Decian McCullagh, "Obama Admin: Cap and Trade Could Cost Families $1,761a Year," CBS, September 15, 2009.

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