By now, readers of this blog are among the privileged elite know that there are many ways of structuring a cap and trade plan. You can auction the carbon permits to corporations and use the revenues to give people a tax break. Or you can use the revenues to give corporations a tax break. Or you can use the revenues to fund research into renewables. Or you can give the permits away. Via Dave Roberts comes some CBO testimony examining these options. Their conclusion? "Auctioning permits and rebating the revenue, compared to freely allocating permits, produces the same macroeconomic effect, but auction-and-rebate is vastly more progressive, favoring low-income taxpayers, while freely allocating permits overwhelmingly favors the rich." There's even a graph:
The report does suggest that giving corporations tax cuts would be more economically efficient. It also leaves room for more progressive options, including a progressive rebate rather than an "equal lump-sum" rebate. Cap and trade doesn't have to hurt low income Americans. But it's one of the ironies of the debate that the folks most likely to raise concerns about higher energy costs on individual households are also most likely to insist that the bill is structured in ways that make low income households worse, rather than better, off.
The report does suggest that giving corporations tax cuts would be more economically efficient. It also leaves room for more progressive options, including a progressive rebate rather than an "equal lump-sum" rebate. Cap and trade doesn't have to hurt low income Americans. But it's one of the ironies of the debate that the folks most likely to raise concerns about higher energy costs on individual households are also most likely to insist that the bill is structured in ways that make low income households worse, rather than better, off. 
