June 6, 2017

TAX WHAT YOU DON'T WANT, NOT WHAT YOU DO:

Let's scrap regulations in favor of a carbon tax (Alex Brill, 6/06/17, AEIdeas)

[C]onservative voters - and groups that Republicans would like to see vote conservative - are increasingly interested in policies to mitigate the real risk of climate change. More importantly, pro-growth fiscal reforms will be critical for the well-being of future generations. With these realities in mind, here are the three key components of a deregulatory carbon tax reform:

Roll back burdensome carbon-related regulations. As conservatives well know, command-and-control regulations can be inefficient and restrain our economy. Many existing regulations aimed at reducing carbon emissions are textbook examples of this.There should be a definitive legislative rollback of these regulations for the simple reason that they do not work well. The motivation is not disregard for the environment or climate, but distrust in the regulatory state as an efficient instrument.

Let a carbon tax do well what regulations do poorly. A transparent carbon tax would reduce emissions in a more efficient manner than any strategy developed by bureaucrats in Washington. Consumers would respond to a uniform price on carbon emissions by using less energy, and producers by developing technologies to reduce the carbon intensity of the energy that is consumed. Undeniably, a carbon tax would raise the price of certain consumer goods, including electricity and gasoline. That is a reality that should not be denied, or avoided. It is, in fact, the policy's intent. The tax on these goods would make explicit a cost otherwise not recognized.

Finance a large, pro-growth tax cut. In addition to achieving a market-driven reduction in emissions, a carbon tax would generate revenue that could be used to offset the cost of eliminating other taxes that impose greater harm on the economy. Deciding which taxes to cut or eliminate will depend in part on the success of the current tax reform effort, but there is mounting evidence that a reduction in the corporate income tax would have a meaningful impact on capital stock and ultimately on workers' wages. Turning carbon tax revenues into universal welfare payments, as some have suggested, would not promote long-run economic growth.

It makes no sense to tax income, savings, investments and profits.

Posted by at June 6, 2017 3:18 PM

  

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