Editor’s Note: An ambitious but largely aspirational agreement comes to us, out of Paris, leaving wide open the question: how, exactly, should carbon reduction be accomplished, and how should that be financed?
Fortunately, a new, intriguing supply-side answer to both questions — Clean Tax Reform — comes to us out of a fascinating left/right conversation, co-hosted by Joan Blades, co-founder of MoveOn.og, and Rod Richardson, Director of the Grace Richardson Fund. What got our attention was not only the surprising insight that supply-side economics can be used to address climate change, but the further insight that climate change could be an opportunity to advance and demonstrate the power of supply side tax reform, whether we believe in climate change or not. We believe it is newsworthy, not just that a new supply side approach to climate change may now be suddenly relevant, but that progressives and conservatives seem willing to lean in to the same new idea.
Here is the story of that conversation, simultaneously published today in The American Spectator and The Huffington Post:
Professor Philip Tetlock has studied why experts are so often wrong in their predictions. He discovered that experts who have a narrow ideological focus are less accurate than experts who look farther afield — collecting information and ideas from diverse sources.
As a co-founder of MoveOn.org I’ve seen too much partisan dysfunction. I don’t believe we are going to be able to find the best solutions to climate change — or any complex problem — by adversarial means, or by talking only to people who agree with us. We designed Living Room Conversations as a tool to address this disconnect — to allow people to expand their field of vision and build unlikely friendships so that we can benefit from everyone’s best ideas.
This realization has caused me to intentionally cultivate diverse friendships. Recently my conservative colleague Ralph Benko introduced me to Rod Richardson, the director of the Grace Richardson Fund, one of a family of conservative policy foundations. The Grace Richardson Fund is developing a new supply-side approach to climate change described as “Clean Tax Cuts.”
The idea, as Rod explains it: “If you want more of something, tax it less. So if you want more low CO2 energy and clean tech, simply cut all taxes for such investments. Low tax rates on rising profits will boost returns, inducing investors to pour billions into the sector. That accelerates innovation, driving down the cost while boosting the supply of clean energy. Think of Clean Tax Cuts as a demonstration project for simple, clean, supply-side tax reform, reducing investment tax rates for the one industrial sector that can do the most to stop climate change, while phasing out other uneconomical subsidies and tax deductions. It offers an all-carrot, no-stick alternative that sidesteps the economic pain many people fear other anti-carbon climate policies will bring. If investors could keep 90% of all profits from solar farms, instead of the usual 65% or less, how many solar farms would be built? Think about it. Clean Tax Cuts empowers entrepreneurs and investors to solve climate change.”
After meeting, Rod and I decided to co-host a Living Room Conversation, inviting guests with expertise in climate and economic issues — two progressives and two conservatives. We shared a concept paper describing the basic idea.
On the day of the conversation we discussed the potential for “Clean Tax Reform” to appeal both to supply-side conservatives, who believe that lowering and simplifying taxes is good for the economy, and progressives, who believe that accelerating clean energy investment would speed the transition to a low-carbon economy.
Of course, state and federal governments already offer some tax benefits for clean energy development. Rod pointed out the difference between tax-credit subsidies, which often prop up money-losing ventures, and tax rate cuts, which benefit only profitable businesses. With renewables now hitting the inflection point to profitability, could tax cuts be a new, suddenly relevant option to benefit both the economy and the environment — to juice both the political and industrial transformation to a low-carbon future?
We also talked about how Clean Tax Cuts might encourage the fossil-fuel industry to evolve. Could they give fossil-fuel investors a profitable transformation strategy, helping them diversify into low carbon energy? I was struck by how sympathetic my conservative guests were to the challenges of people dependent on the fossil fuel industry.
John Gable, CEO of AllSides, praised Clean Tax Cuts as the first proposal he had seen since the 1980s that was, he said, “realistic and humane towards both people and the environment. Conservatives worry that many environmental policies, inadvertently or not, hurt middle class and poor people, and sometimes become bastions for crony capitalism. But Clean Tax Reform can be a breath of fresh air. Rather than hurt regular people and reward insiders, it enables the best and brightest entrepreneurs in a free and open market to help the environment and the economy, benefiting all of us.”
Talking about Clean Tax Cuts led to talk of a carbon tax, which despite many supporters has also seen fierce opposition. We explored how Clean Tax Cuts might mesh with other climate policies. Rod noted that if any anti-carbon policies (carbon tax or regulation) are enacted, Clean Tax Cuts could reduce the hardship and cost of such policies — especially easing fossil industry diversification and accelerating the shift to low-cost clean energy much faster than anti-carbon policies alone (essentially acting on both supply and demand sides simultaneously). Felix Kramer, climate leader and founder of CalCars.org and BeyondCassandra.org, commented, “We need more imaginative ways to bridge gaps between progressives and conservatives. Exploring Clean Tax Cuts could lead to unifying proposals focusing on both the supply and demand sides of energy economics. A strategy to reward successful companies, encouraging private investment and accelerated innovation, could catch on. It would be game-changing if one or more Presidential candidates from either party included Clean Tax Cuts in a package deal intended to attract independents and new supporters.”
Of course, we have only just begunexploring the Clean Tax Cut concept, and how it might allow conservatives and progressives to act in concert. I know that introducing a new idea into an already-heated arena might prove challenging. But our guests were refreshingly open to talking across differences and considering new proposals.
California Energy Commissioner David Hochschild wrote, “I found it truly refreshing to have this kind of extended, good-faith dialogue in a period where our country is so divided and stuck in political mud.… I hope this is a model that spreads because I think it is good for our country and our future.”
Ben Smithwick from the Pacific Research Institute commented: “In an era of hyper-partisanship, Living Room Conversations provides an excellent opportunity for individuals with diverse views to come together and discuss today’s most pressing public policy issues. The format keeps the discussion on track and helps participants find common ground. Our conversation brought together a unique group to discuss two hot-button issues, climate change and tax reform, bridging the gap with a possible clean tax cut plan. The conversation marked an important first step in the possible development of a formal policy proposal. “
By the conclusion of our conversation, everyone favored investigating the clean tax cuts concept further and Rod had an answer to the question, “Could this idea have appeal across partisan lines?”
Bottom line: When we come to know and perhaps even like each other, we can explore and benefit from others’ knowledge and best ideas. More than that, by working to meet each others’ needs, we will almost certainly address problems more successfully.