November 22, 2014

AN EASY DEAL FOR BOTH PARTIES:

Bigger, Cleaner, and More Efficient: A Carbon-Corporate Tax Swap (Donald Marron, November 21, 2014, TaxVox)

The United States could reduce its contribution to global climate change and increase domestic prosperity by taxing emissions of carbon dioxide and other greenhouse gases and using the resulting revenue to reduce corporate income taxes. Such a carbon-corporate tax swap would give us a bigger, cleaner economy and avoid any need for more costly efforts to reduce emissions.

This recommendation reflects four recurring lessons from tax and environmental policy.

First, taxing bads is better than taxing goods. When the government levies a tax, people and businesses are less likely to do the taxed activity. Income taxes, for example, reduce the returns to investing so some people and businesses invest less than they otherwise would. Those forgone activities have a real economic cost, and each dollar of revenue imposes more than a dollar of costs on taxpayers. By contrast, when government taxes activities that impose costs on all of society, it can both raise revenue and reduce social harm.

Second, putting a price on carbon is the most efficient way to reduce carbon emissions.

Tax what you don't want, not what you do.
Posted by at November 22, 2014 12:07 PM
  

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