President Obama’s budget has a cap and trade proposal in it that would raise considerable revenue for the government. Such policies are often called taxes. I am on record supporting a carbon tax. However, I do wonder if the Administration has committed a serious tactical error in its proposed plan.

1. By directly linking the cap and trade program to wealth redistribution the Obama Administration has opened the door for some very strong political opposition, with nothing to do with carbon. They have enlarged the scope of conflict and this cannot help in the political battle over carbon policy.

2. A better approach would have been to clearly separate the implicit carbon tax from the wealth redistribution. They could have done this by making the C&T program fiscally neutral (i.e., the funds would go to the general treasury with an across the board reduction in existing taxes, such that there was no redistributive effect). They could have then presented the redistributive tax policies as a separate policy proposal.

3. This approach would allow policy makers to debate C&T separately from tax policy. Unfortunately, these are now joined together. The Obama folks may be thinking that they can get two birds with one stone. Their opponents now can think the exact same thing.

The net result, in my judgment, will not be pretty. All the more reason for a straight carbon tax at whatever level can be sold politically, the debate would then be over the level of the tax, and not all of the accompanying ideology and linked policies.