Your Opinion: Nuances separate carbon "tax' vs. "fee'

Dear Editor:

I've had many conversations about using "carbon tax" vs. "carbon fee" in describing legislation advocated by Citizens' Climate Lobby to reduce greenhouse gas emissions. Economists, journalists and opinion writers (like me) tend to use them interchangeably. One letter here last week called my use of "fee" deceptive, so maybe there is an important nuance that deserves discussion.

I became interested in a carbon tax (or maybe a fee) because many conservative economists promote it as the most efficient way to reduce greenhouse gas emissions. This includes the well-known economist, George Schultz, who served as secretary of state under Ronald Reagan. In April 2013, Schultz opined in The Wall Street Journal: "Why We Support a Revenue-Neutral Carbon Tax." He co-wrote the piece with now deceased Gary Becker. Both were senior fellows at the conservative Hoover Institution.

Schultz, Becker and other conservative economists and legislators often use the term "revenue-neutral carbon tax" to describe a policy where carbon is taxed and all revenue collected is returned to citizens. Because taxes are generally collected to fund government, some argue that a tax collected on carbon-based fuels and returned to citizens in the form of a dividend should more accurately be called a fee.

So where would the nuance between a carbon "tax" vs. "fee" be important? Some policy proposals call for a carbon tax where revenue goes to Congress to decide if it should be returned to citizens or used to offset other taxes (both revenue neutral) - or to pay for new programs and/or reduce the federal debt (not revenue neutral).

Conservative representatives along with their constituents worry that Congress can't be trusted to return carbon fees to citizens. The solution is to make sure the legislation doesn't give the revenue to Congress.

Schultz and Becker had the same concern when they wrote: "Funds collected should go into an identified fund and the amount flowing in and out should be clearly visible. This flow of funds should not be included in the unified budget, so as to keep the money from being spent on general government purposes, as happened to the earlier excess of inflows over outflows in the Social Security system."

It is always best to use accurate terminology when discussing policy. That's why we should ask Congress for a revenue-neutral carbon fee and dividend that returns all revenue back to households - not a tax for Congress to spend!