January 10, 2013

WE ARE ALL PIGOVIAN NOW:

The beauty of a carbon tax - and its exemption for the poor (Paul Boudreaux / January 10, 2013, CS Monitor)

The policy arguments for a carbon tax are compelling. Economists have convinced the environmental community that market-oriented systems, as opposed to inflexible commands, are the best way to regulate. The simplest and most efficient way to change people's behavior is to tax them; everyone is then encouraged to look for efficient ways to avoid the taxed activity. [...]

A benefit of consumers paying for the tax is that they would be encouraged to make important choices - such as adjusting their thermostats, changing their light bulbs, or refusing to do so and paying the tax. As with any tax on consumption, however, poorer Americans would suffer more than wealthier ones.

A simple exemption, however, could make the tax burden much lighter for poorer Americans, while at the same time encouraging even greater conservation. The idea is simple: Each household would be exempted from the tax for a modest amount of electricity per month or year; the exemption would be most effective if the system also imposed only minimal usage charges for electricity below the cutoff. The system would recognize almost all households need to use some electricity, but that consumption beyond the minimum would be taxed.
Posted by at January 10, 2013 8:16 PM
  
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