I Soften My Disagreement with an Increased Pigou Carbon Tax
In an earlier post, I criticized Harvard economist Dr. Greg Mankiw for his support of what is known as a Pigou tax on carbon emission producing products. After careful consideration and much research on the issue, I have softened my argument against Dr. Mankiw's proposal.
The tax would increase the tax on gasoline thereby raising price and reducing the quantity demanded. This would lower greenhouse emissions and presumably be good for the environment. My initial argument was based on the fact that taxes are almost always bad. Although I still believe that in most cases, this particular issue could be an exception. Let me go ahead and state that I am still not sold on the idea, but as I am about to explain, it may be the lesser of evils. Judging by the current political climate, there will almost certainly be future legislation passed to curb environmentally harmful activities. The solution, if left up to politicians, will almost certainly be a poor one. This increased sales tax on gasoline is at least fair and predictable. No one would be forced to pay it, and individuals would be taxed based on their contribution to pollution.
What has me rethinking my position on this issue is that Dr. Mankiw has proposed increasing this tax while lowering the income tax. That is exciting. By lowering the income tax, the government is keeping more capital in the hands of the most productive members of society. This is good for everyone since capital is the fuel of economic growth.
Now let me explain why I am still not completely sold on this plan. By increasing the gas tax, the government is encouraging the use of frustrating public transportation, car pooling, or simply not traveling at all. These make us less mobile. I believe mobility is a key behind productivity, since it not only makes us more time-efficient travelers but also keeps us happier since we are autonomous and don't have to deal with the headaches of group travel. Also, I am sure there are unintended consequences that have yet to be conjured.
Alas, if Congress feels it must do something, I support experimenting with raising the gas tax and lowering the income tax. The economic benefit may actually be positive since adding this tax may actually make our tax system more fair and more efficiently allocate resources within our economy.
In an earlier post, I criticized Harvard economist Dr. Greg Mankiw for his support of what is known as a Pigou tax on carbon emission producing products. After careful consideration and much research on the issue, I have softened my argument against Dr. Mankiw's proposal.
The tax would increase the tax on gasoline thereby raising price and reducing the quantity demanded. This would lower greenhouse emissions and presumably be good for the environment. My initial argument was based on the fact that taxes are almost always bad. Although I still believe that in most cases, this particular issue could be an exception. Let me go ahead and state that I am still not sold on the idea, but as I am about to explain, it may be the lesser of evils. Judging by the current political climate, there will almost certainly be future legislation passed to curb environmentally harmful activities. The solution, if left up to politicians, will almost certainly be a poor one. This increased sales tax on gasoline is at least fair and predictable. No one would be forced to pay it, and individuals would be taxed based on their contribution to pollution.
What has me rethinking my position on this issue is that Dr. Mankiw has proposed increasing this tax while lowering the income tax. That is exciting. By lowering the income tax, the government is keeping more capital in the hands of the most productive members of society. This is good for everyone since capital is the fuel of economic growth.
Now let me explain why I am still not completely sold on this plan. By increasing the gas tax, the government is encouraging the use of frustrating public transportation, car pooling, or simply not traveling at all. These make us less mobile. I believe mobility is a key behind productivity, since it not only makes us more time-efficient travelers but also keeps us happier since we are autonomous and don't have to deal with the headaches of group travel. Also, I am sure there are unintended consequences that have yet to be conjured.
Alas, if Congress feels it must do something, I support experimenting with raising the gas tax and lowering the income tax. The economic benefit may actually be positive since adding this tax may actually make our tax system more fair and more efficiently allocate resources within our economy.
posted by BleedRzrbkRed at Monday, April 23, 2007
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