The Truth-O-Meter Says:
“The administration raises revenue for nationalized health care through a series of new taxes, including
a light switch tax that would cost every American household $3,128 a year.”
House Republican Conference on Tuesday, March 24th, 2009 in a press release and Web post
GOP full of hot air about Obama’s “light switch tax”
Taxpayers may have been shocked to learn from House Republicans that President Barack Obama wants to pay for health care by charging them to turn on a light.
“The administration raises revenue for nationalized health care through a series of new taxes, including a light switch tax that would cost every American household $3,128 a year,” the House Republican Conference said in a Web post and press release titled “Questions on the Budget for President Obama,” distributed March 24. “What effect will this have on Americans struggling to pay their mortgages?” it asked.
This alleged “light switch tax” is a reference to Obama’s proposal to tax power companies for carbon dioxide emissions, and allow companies to trade emissions credits among themselves. That’s called a cap-and-trade program, and Republicans say the companies would just pass the tax on to electricity consumers.
So any revenue raised by a cap-and-trade program amounts to a “light switch tax” on consumers, the House Republicans alleged.
To back up the claim, their staff pointed us to an M.I.T. report that says a similar a cap-and-trade proposal (the administration has not yet detailed their own version) would raise $366 billion per year. If you divide that by the 117 million households in the United States, you find it would cost each household $3,128, they said.
But is it that simple? Can you just assume consumers would be out $366 billion since that’s how much the program would raise from fuel companies?
No.
“It’s just wrong,” said John Reilly, an energy, environmental and agricultural economist at M.I.T. and one of the authors of the report. “It’s wrong in so many ways it’s hard to begin.”
Not only is it wrong, but he told the House Republicans it was wrong when they asked him.
“Someone from the House Republicans had called me (March 20) and asked about this,” Reilly said. “I had explained why the estimate they had was probably incorrect and what they should do to correct it, but I think this wrong number was already floating around by that time.”
It continues to float.
That’s just not how economists calculate the cost of a tax proposal, Reilly said. The tax might push the price of carbon-based fuels up a bit, but other results of a cap-and-trade program, such as increased conservation and more competition from other fuel sources, would put downward pressure on prices. Moreover, consumers would get some of the tax back from the government in some form.
The report did include an estimate of the net cost to individuals, called the “welfare” cost. It would be $30.89 per person in 2015, or $79 per family if you use the same average household size the Republicans used of 2.56 people.
The cost would grow over time as the program ramps up, but the average annual cost over time in today’s dollars — that is, the “average annual net present value cost” — is still just $85 per person, Reilly said. That would be $215.05 per household.
A far cry from $3,128. And that isn’t the only inaccuracy in the claim.
The Republican press release said the cap-and-trade program would pay for “nationalized health care.”
But Obama’s health care proposal is not for “nationalized health care.” It does call for a “National Health Insurance Exchange” with private insurance options plus a new public plan based on the one currently available to members of Congress — but consumers could still keep their private insurance if they want, as Obama emphasized during his presidential campaign.
Even if it were true that Obama wants to nationalize health care, he does not envision paying for health care reform with the cap-and-trade program as the Republicans alleged. Rather, his $634 billion health care reserve fund is to come from efficiencies in Medicare and Medicaid and decreased deductions for some charitable contributions by upper-income taxpayers, according to Obama’s proposed budget.
The House Republicans partially corrected this portion of the claim, changing their Web site and sending out an updated press release that says the cap-and-trade program would pay for “increased spending” rather than health care.
But it still calls cap-and-trade a “light switch tax” and claims the whole cost would come from consumers.
If the Republicans had simply misstated the results of the MIT study, the Truth-O-Meter would have been content giving this one a False. But for them to keep repeating the claim after the author of the study told them it was wrong means we have to set the meter ablaze. Pants on Fire
