Comments on: the point of a carbon tax and offsetting cuts to payroll taxes

By: TPRJones

TPRJones — Thu, 03 Sep 2009 13:54:33 +0000

“if a 20 gallon fill up cost me $240 instead of $40, I’d sure as heck change my driving patterns a bit”

Not me, I’d just buy from the inevitable black market that would spring up overnight.

By: Michael

Michael — Thu, 03 Sep 2009 04:13:47 +0000

OK, bad example. Coyote want’s to keep it revenue neutral. I don’t think he wants to hurt the current standard of living and politicians want to get re elected so this type of change would have to affect the fewest Americans as possible. I could see some shifting around in parts of the economy but little to no co2 reductions.

As in my bad example, yea, you get to pocket $10 bucks for each gallon saved, but government isn’t going to take the tax loss. They’d drop the revenue neutral idea and non fuel taxes would go up.

With current technology, co2 reduction comes only with huge costs.

By: coyote

coyote — Thu, 03 Sep 2009 03:55:00 +0000

I think “rebate” is the wrong way to think of it. Of COURSE if you paid a higher price and then had the exactly that amount rebated to you, then it would not be a very powerful incentive. But that is not what is being proposed.

I think things are easier if you consider payroll taxes to be a sales tax on labor, which they are in effect. So we have a sales tax regime, with differing tax levels on different types of products. If we raise taxes on one item, but drop taxes on the others, then sales of that one item are certainly going to suffer. Its price just went up relative to all the other things we buy. Let’s imagine a simplified world where we can buy any of 10 items (call them A, B, C, etc), each priced at $10, and we have $100 in income. Now imagine the same world tilted such that we have $105 of income and all items are $10 except “A” which now costs $20 each. On average, most people will buy less “A” and more of other stuff.

I’m a libertarian, so I grit my teeth at such games. I don’t like the taxes in the first place. I don’t like the government playing outcomes games with taxes. But my point is that if we are going to insist on doing something to limit CO2, then shifting the sales tax burden so that total taxes are the same but taxes on fuels are higher while taxes on labor are lower strikes me as a substantially lower cost solution than any of the other alternatives being suggested.