ACCF Honors House Ways and Means Committee Chairman Bill Archer

Climate Experts, Senator Thomas Discuss Impact of Kyoto Protocol at Center Briefing

ACCF Abroad and at Home

Kudos and Plaudits for ACCF

AT THE MARCH 1 CAPITAL FORMATION FORUM, ACCF President Mark Bloomfield presented House Ways and Means Committee Chairman Bill Archer (R-TX) with a plaque commemorating the significant pro-capital formation tax policy measures the Chairman has championed over the past several decades. Mr. Bloomfield praised Chairman Archer who, he said, "always has the courage of his convictions in the pursuit of good tax policy to promote the saving and investment needed for economic growth."

Chairman Archer told ACCF supporters how much he "values the contributions the American Council for Capital Formation makes in providing the intellectual framework for public policy that is essential to this country's economic growth."

Addressing specific tax issues that might be considered in the remainder of the 106th Congress, the Texas Congressman noted that the House Republican Leadership plans to send several small tax bills to the Senate this year. "The question of whether we have a larger tax bill remains to be resolved. I'm taking the position that we should wait and see what the Senate does," he said, adding, "Republicans in the House and the Senate need to stand together."

Chairman Archer said he hoped action on "Death Tax" reform might be possible this year. [The Small Business Tax Fairness Act of 2000 (H.R. 3832), which included provisions cutting the estate tax, passed the House on March 9.] "The Death Tax is a dollar-for-dollar tax on capital and does away with the saving needed to create the tools that can ultimately provide a better life for all Americans. Last year, we were the first Congress to repeal the Death Tax, but President Clinton vetoed the bill. I will continue to fight to reduce taxes on saving and investment."

Turning to the recent World Trade Organization ruling concerning tax breaks granted to foreign sales corporations (FSCs), Chairman Archer noted that the ruling impacts the ability of U.S. firms to export. "I am looking for another approach. If we repeal the FSC measure, we could come up with something better. The barriers to exporting in the tax code must be removed. If we do not dismantle these barriers, more and more corporations will shift their operations abroad."

"It is a joy to speak to this group—what you're doing is for the future of all Americans."
—Ways and Means Committee Chairman Bill Archer

Chairman Archer also stressed his commitment to eliminating the income tax and replacing it with a tax on consumption. He noted that the Ways and Means Committee hearings the week of April 10 would focus on the importance of moving the tax system in a direction that promotes saving and investment.

"This is the finest moment in the history of the world. We have an obligation to pass this torch to the next generation. The only cloud on the horizon is the dearth of domestic private saving, which is the lowest it has been in our history. Our dependency on foreign capital is dangerous. We need incentives to promote greater saving in order to maintain our strong economy and provide jobs," he concluded.

"RESPONSIBLE GOVERNANCE includes environmental stewardship," Senator Craig Thomas (R-WY) told an audience of members of Congress and their staffs, climate policy scholars, the media, and representatives from the Clinton Administration, the embassy community, and trade associations at a March 27 policy briefing on the Kyoto Protocol. The briefing featured a discussion of developed countries' prospects for meeting the Kyoto targets by Mary H. Novak, senior vice president, WEFA, Inc., the presentation of new research on the Protocol's impact on Australia and developing countries by Meg McDonald, deputy chief of mission of the Embassy of Australia, and an explanation of the Protocol's impacts on the U.S. economy by Dr. Margo Thorning, senior vice president and director of research, ACCF Center for Policy Research.

Prospects for Ratification of the Kyoto Protocol

Senator Thomas, a member of the Senate Energy and Natural Resources Committee, discussed the future of the Kyoto Protocol, which calls for industrialized economies such as the United States, Europe, and Japan to reduce substantially their collective emissions of six greenhouse gases by 2008–2012. "The United States Senate has already voted 95–0 to reject any climate treaty that causes the United States significant economic harm and does not include the developing countries," Senator Thomas said. "Without global participation, emissions will continue to rise even if the United States were to make painful cuts in energy use. If scientific research were to eventually demonstrate a real need for action, we should carefully weigh the costs and benefits of any new regulations and implement them in such a way as to cause the least harm to our economic well-being."

Can Annex B Countries Meet Their Emissions Targets?

"A range of estimates of growth in energy use prepared by five government organizations and by WEFA energy analysts in Europe all demonstrate that Annex B countries cannot achieve their emissions targets without extensive use of flexibility mechanisms such as emissions trading and joint implementation," Ms. Novak told briefing participants. Emissions credits available for trade, however, are projected to be scarce and expensive due to the desire for economic growth—resulting in increased energy use—in developed countries. Thus, while European countries may support the "spirit" of Kyoto, their policymakers have set economic growth and stability for Europe and its neighbors as their primary goal, explained Ms. Novak.

Impact of the Kyoto Protocol on Australia and Developing Countries

Ms. McDonald, who previously served as Australia's ambassador for the environment and lead negotiator in international climate change, presented a detailed assessment of the trade and economic impacts of implementation of the Kyoto Protocol. In particular, production and export of emission-intensive goods is expected to increase for developing countries as they gain competitive advantage by not being subject to emissions limitations. However, significant reductions in energy demand would cause producer prices to drop, affecting areas such as Indonesia, Mexico, and the Middle East.

Need for a New Approach

Given the severe macroeconomic impacts the Kyoto Protocol would impose on the United States, including reducing U.S. GDP by 1–4 percent, slowing wage growth significantly, worsening the distribution of income, and reducing growth in living standards, Dr. Thorning called for a new approach. Voluntary measures to reduce CO₂ emissions should include modifications to U.S. tax policy that reduce the cost of capital for energy-efficient investments. Moreover, the introduction of techniques such as carbon capture and sequestration from central power facilities, soil sequestration, and reforestation could radically change both the cost and character of carbon mitigation. "Adopting a thoughtfully timed climate change policy—based on accurate science, improved climate models, global participation, tax incentives to accelerate investment in energy efficiency and sequestration, and new technology—is essential," Dr. Thorning said, "both to U.S. and global economic growth and to eventual stabilization of the carbon concentration in the atmosphere." The Kyoto Commitments: Can Nations Meet Them With the Help of Technology, a new book from the ACCF Center for Policy Research, was released at the briefing.

The American Council for Capital Formation recently participated in a number of international meetings on climate change in an effort to bring its research and analyses to a global audience. On April 13, ACCF Senior Vice President and Chief Economist Margo Thorning traveled to London to discuss prospects for economic growth and greenhouse gas emission limits in developed countries before an audience of senior representatives of global energy-intensive industries at the International Federation of Industrial Energy Consumers Workshop on Climate Change. Dr. Thorning also addressed climate issues before the International Chamber of Commerce Commission on Environment in Paris on April 17 and the EU Committee of the American Chamber of Commerce in Brussels on April 18.

Closer to home, Dr. Thorning spoke to guests of the Frontiers of Freedom Institute on April 3 on Capitol Hill about how implementation of the Kyoto Protocol would raise consumer prices and increase income inequality.

Kudos and Plaudits for ACCF

“The work of the ACCF helped make it possible to enact the 1997 cuts in capital gains taxes, as well as the 1998 reduction in the capital gains holding period.”

—Representative Bill Archer (R-TX), Chairman, Ways and Means Committee

“Working with the ACCF for more than a decade has been a productive partnership.”

—Dr. Dale W. Jorgenson, Frederic Eaton Abbe Professor of Economics
at Harvard University, and President of the American Economic Association

“I was pleased to work with the ACCF to make the 1997 capital gains tax cut a reality. This kind of tax relief benefits all Americans. We need to continue pushing for tax policies to promote saving and investment.”

—Senator Orrin Hatch (R-UT), member, Finance Committee

“I thank the ACCF for its fine work in educating the public about the benefits of saving and investment.”

-Senator Joe Lieberman (D-CT), Chairman of the Democratic Leadership Council and cosponsor, with Senator Hatch, of the bipartisan 1997 Senate legislation to reduce capital gains taxes

“ACCF does an outstanding job of producing relevant and informative evidence on key current policy issues. Keep up the good work!”

—Dr. James M. Poterba, Mitsui Professor of Economics, Massachusetts Institute of Technology

“Continued strong growth in the entrepreneurial sector depends upon bright people having access to capital. The ACCF’s estate tax study brings a new perspective to the negative impact of this tax on entrepreneurship.”

—Representative Jennifer Dunn (R-WA), member, House Ways and Means Committee

“[Y]our statement to the Ways and Means Committee [was] the most effective combination of advocacy and analysis in the tax policy area in a long time.”

—Hon. Murray L. Weidenbaum, Mallinckrodt Distinguished University Professor, Washington University

“The ACCF’s study fuels my conviction that the repeal of the estate tax should be a top priority for this Congress.”

—Senator Jon Kyl (R-AZ), leading Senate proponent of estate tax elimination

“The new ACCF study provides conclusive evidence that the inherently unfair estate tax places a significant burden on U.S. labor and employment growth.”

—Representative John Tanner (D-TN), member, House Ways and Means Committee

“I have been a soul mate of the ACCF for a long time.”

—Kevin A. Hassett, adviser to the presidential campaign of Senator John McCain on taxes and economics and resident scholar at the American Enterprise Institute