OMB Says Higher Energy Costs Offset by Tax Credit
February 27, 2009 7:22 PM
Former House Speaker Newt Gingrich received a raucous reception when he entered the Conservative Political Action Conference (CPAC) in Washington, D.C., on Friday, Feb. 27, 2009. Gingrich entered to the sounds of "Eye of the Tiger" and was mobbed by conservative activists.
Ferdous Al-Faruque/ ABC News
Former House Speaker Newt Gingrich charged Friday that the cap-and-trade proposal contained in President Barack Obama's budget amounts to a $640 billion "energy tax" over eight years that will break the new president's pledge not to raise taxes on the middle class.
"Let me get this straight," said Gingrich. "We're not going to raise tax on anybody making under $250,000 a year unless you use electricity. And we are not going to raise taxes on anybody under $250,000 a year unless you buy gasoline. And we are not going to raise taxes on anybody who makes under $250,000 a year unless you buy heating oil. And we're not going to raise taxes on anybody earns less $250,000 a year unless you use natural gas."
"And I try to think to myself," he added, "even in the left wing of the Democratic Party, where there are some people who are fairly unusual, how many of them don't use heating oil, natural gas, gasoline or electricity?"
Gingrich's remarks, which were made at the Conservative Political Action Conference (CPAC) in Washington, D.C., were the latest reminder that Obama's plan to reduce greenhouse gas emissions might be one of the hardest lifts of his presidency.
Under the cap-and-trade system envisioned by Obama, the federal government would set a ceiling on carbon emissions and require companies to bid for permits to emit greenhouse gases. The government would gradually lower the amount of credits available. Firms that reduced their emissions below the required level could sell leftover credits to other polluters.
Obama's cap-and-trade proposal did not face much scrutiny during last year's campaign because Sen. John McCain, R-Ariz., backed his own version of cap-and-trade. Most Republicans, however, oppose the idea as do several Democratic senators from coal producing states.
The Obama administration acknowledges that a cap-and-trade system would result in higher energy costs to consumers. It argues, however, that critics like Gingrich are overlooking that the president is aiming to offset those new costs by extending the $800 per year "Making Work Pay" tax credit that low- and middle-income workers received under the recently enacted stimulus package.
"He's just wrong. This is not a tax. This is a proposal to bring our emissions into a much more manageable position," said Tom Gavin, a spokesman for Obama's Office of Management and Budget. "It's exactly what the president campaigned on and it's what he told the American people he was going to do."
From 2012 to 2019, Obama's budget blueprint envisions a cap-and-trade system raising $646 billion. The bulk of that money -- $525.7 billion -- is supposed to pay for Obama's "Making Work Pay" tax credit. $120 billion of those cap-and-trade revenues would pay for clean energy technologies.
"The tie between the "Making Work Pay" tax credit and climate revenues is intentional," said Gavin. "As some costs go up a little bit, we want to make sure that people have extra money in their pockets to offset those costs."
"Gingrich is overlooking the offsets and he's overlooking the benefits to transforming our economy through clean energy jobs," he added.
Exact details of the cap-and-trade proposal, which would have to be passed by Congress, have not yet been worked out. Obama does, however, outline the goal of the system on page 100 of his budget.