A Federal Tax on Market Share Changes

It is a recurring theme on this blog:  Large corporations who currently dominate their industries generally accept, even encourage, government regulation.  Generally, as industry leaders, they have the opportunity to shape regulation to their liking, and most regulations preferentially help the large corporations over the small, and help incumbents over new entrants.

And here is yet another example, though it is one many of us have been expecting.  Contrary to campaign rhetoric, it appears that Obama's proposed cap-and-trade system will give CO2 certificates to current incumbents for free.  Only new entrants to the market, or those who wish to grow, will have to pay for them.  This in effect makes the system a federal tax on market share changes.  Laws like this are supported by industry leaders in the same way that sitting Congressmen always love campaign speech restrictions.

The next thing to watch for is whether there are provisions for carbon offsets.  Such offsets are an accounting nightmare, and a virtual Disneyland for rent-seeking.  More on cap-and-trade vs. carbon tax here.  More on offsets here.  And more on why this is all silly in the first place here.

  • I have never seen one politician cause do and say so many stupid and dangerous things in such a short period of time.

    The way he's going, you'll need to buy carbon offsets to breath, but not to bloviate.

  • Jeff

    I'm not at all surprised. This legislation was dead on arrival in it's current form. There was no way they could get Democrats in industrial or oil producing states to vote for it. Giving away CO2 certificates to incumbents makes it beneficial to their campaign funds, but still doesn't get the bill passed. Cap and trade destroys jobs.

    Distressed and marginally profitable firms with large CO2 certificates will be shutting capacity and eliminating jobs so they can sell their most valuable asset, the free CO2 credits. Imagine running as an incumbent representative in Ohio, Michigan or Pennsylvania who voted for this garbage.

    I still say it's DOA.

  • Chad

    I like to use the analogy that the corporate world is like professional boxing. Right now there is a heavy weight champ. He was not always the champ and someday will lose his belt to a new champ. Maybe someone nobody has ever even heard of. But, right now the future champ is working hard to fight his way to the top just like the current champ did. Now imagine if the current champ got to change the rules to anything he wanted. Maybe he would say that all his opponents most now fight with their hands tied behind their backs and blindfolded. It doesn't matter how old and decrypted he became, he would always be able to beat the challenger. That is what corporate america is doing. They are getting the government, through lobbying and back scrtaching, to change the rules to favor them. The bigger the corporation the more sway they have to get the laws past that will keep them on top no matter how frail and decrypted they become. Of course they may learn too late that they are in fact sleeping with the enemy and find themselves under government control........Oh wait, that's happening right now.
    You sow what you reap.