Blog: Green Tax Shift (8 comments) — A Green Tax Shift is a way to address global warming, create jobs, save the environment, strengthen our economy and reduce our dependence on middle eastern oil, all at the same time. For greenhouse emissions, it could involve reducing income tax for l... more
This share is well thought-out, and a clear proposal for mitigating the negative environmental impact of free-market capitalism. How could I bring this idea to the attention of my congressional representatives? ...in a way that won't be easily dismissed? What other issues may have to be addressed to get political momentum on this proposal? Holly
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Unfortunately most politicians won't touch it. People are afraid of high petrol prices. Any sensible argument would be lost in the scare campaign from the oil company sponsored party. By all means contact all your local, state and federal candidates, but we need to focus on getting the public more informed first.
Even our greens party candidate won't use the term green tax.
Freediver had posted this idea on a blog, and I had responded. He asked
me to join and post my comment on this forum.
- in the U.S. one in 8 people lives in poverty, and that's not counting
the illegal immigrant families (1 in 20 workers in the US is illegal).
The poor pay very little if any income taxes, so how will a reduction
in income tax help them cope with the increase in price of core
products? Won't it make their situation perhaps more dire?
- in a globalized world where the cost of commodities is dictated
by the market, one country's taxes hurt its exports just the same as
another country's subsidies help that country's exports. On what basis
should one country decide to take on the task of curbing emissions at
the expense of its exports?
Re the last point, I don't mean to come across as defeatist. If
countries behaved as its people in doing the right thing, the world
would be a better place.
The 2nd point is an economical one. Say, I buy Natural Gas and make fertilizer or plastic. Let's say I am in a country which has the market share of these products. Consequently, perhaps my industry pollutes a lot. If my country wanted to make a dent in its emissions and chose to tax Natural gas, suddenly my industry is hit in a very bad way. Not only does this have economic consequences for my country, it has consequences for the world which has come to rely on my products.
Am I off base here? If so, my apologies.
Generally. I think taxation has to be fairly administered with attention paid to the total cost of the product/service. Unfortunately, like all things monetary, tax reform has become a political hot potato.
A related problem is Peak Oil, and ASPO has come up with a protocol for averting problems by proposing an international accord, Oil Depletion Protocol. Somehow there was consensus that tax reform will not fly. [If you want to read more about Peak Oil, Richard Heinberg is an excellent resource]
Personally, I believe a global accord, followed by communities signing on to it [as is happening with Kyoto in the US] is the way to go. Taxes, esp such suggested taxes are by their very nature federal, and I have no faith in federal governments. If federal governments don't sign on, communities (cities, counties, state) should be able to sign on, somehow.
Of course, my experience is colored by living in the States, though, it is primarily the U.S. (and Australia perhaps) that is the renegade as far as arriving at a consensus on global warming.
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This varies from country to country. If it is a significant problem, you should either make another compensatory change to maintain the wealth distribution (eg higher welfare), or reduce other sales taxes instead of income tax.
Do people on minimum wage pay income tax in the US?
so how will a reduction in income tax help them cope with the increase in price of core products?
The price of products will not increase on average. An increase in carbon tax will not automatically increase energy bills. Companies will use energy more efficiently. In most cases the potential improvements in efficency are far higher than potential carbon taxes. It is mostly institutional barriers holding back the improvements and the changes often make sense on current prices. It's just that people don't think enough about it. Another price jolt will make them take a second look. The first oil shock did this, but then we started going backwards again because oil became cheap again because people weren''t using it.
Also, a decrease in income tax will not just give those people with jobs more take home pay. There could be a reduction in wages to partially compensate, meaning that products become cheaper. There will be more jobs available as it will be more economical to employ low skilled labour than highly skilled engineers to maintain machines. If the income tax reduction was wiped out by salary reductions, then the cost of goods would not go up.
one country's taxes hurt its exports just the same as another country's subsidies help that country's exports
The subsidies may help the specific export, but overall they harm the country. They help the country that the subsidised goods go to. Suppose America subsidises cars and exports them to Canada. That means that Candadians are getting cheaper than cost price cars that American taxpayers are paying for. It may harm the Canadian auto industry, but if America is happy to pay them to take their cars, it makes sense for Canada to take advantage of that and compete in other areas. It would mean a direct flow of American taxes into Canada.
Also, all taxes harm exports - both income taxes and sales taxes. Switching from one to the other will have a neutral effect. Except for the case where the new tax internalises an externality. For example, the community suffers a real cost due to global warming. Not charging emitters is effectively subsidising the activity. A reduction in economic activity in certain industries due to a carbon tax will be offset by lower costs to society from global warming.
Say, I buy Natural Gas and make fertilizer or plastic. Let's say I am in a country which has the market share of these products. Consequently, perhaps my industry pollutes a lot. If my country wanted to make a dent in its emissions and chose to tax Natural gas, suddenly my industry is hit in a very bad way. Not only does this have economic consequences for my country, it has consequences for the world which has come to rely on my products.
Switching from taxing the employees of that industry to the natural gas won't change the bottom line if you allow the company to reduce wages so people's take home pay is the same. If they find a way to make the same amount of fertiliser from less gas, then everybody benefits.
I think taxation has to be fairly administered with attention paid to the total cost of the product/service.
Internalising externalities? By total cost you mean the cost to society of pollution?
A related problem is Peak Oil
The market will internalise the cost of an oil shortage. The market would allocate the use of all the oil quickly, but not until until we can switch completely to alternatives. However, there is plenty of low grade coal which can replace it, but it has even higher emissions. The conversion from coal to a transport fuel will make it a bit more expensive.
Somehow there was consensus that tax reform will not fly.
This would be the case if oil companies were behind it. The people who own the oil reserves stand to make a huge amount of money if it becomes a scarce resource. But if people stop buying it because it is taxed, their investment is worthless. This is the risk you take with any investment, it's just that oil is powerful to influence policy tp tip the odds in it's favour, at the expense of the community.
There are some potential economic costs. If we switched to renewable rather than just reducing carbon emissions through efficiency, then the tax revenue would dry up and we would have to go back to taxing income again. We would be using renewables even though the cost (ignoring externalities) of oil was cheaper. But only if you ignore the externalities.
Also, if most countries made the switch, there could be an economic advantage for a country to focus on highly polluting industries. They would be making the rest of the world suffer the pollution while making a profit. At this point international negotiation would become necessary, but that is a long way off. At the moment the countries doing most of the pollution (eg the US) also have the most to lose from global warming and are most able to make the necessary changes.
Carbon trading requires the international agreements upfront. A Green Tax Shift can accomodate significant variations in the rate at which different countries take it up. Europe is already doing it. Australia and America will follow. Eventually China and India will do it too.
Thanks for the detailed response, Freediver... September 01, 2006 6:39 PM
I'll respond only to the point about peak oil, cause I think it is an important one. The Oil Depletion Protocol was arrived at by activists who've sounded the alarm on peak oil, but virtually no government has bought into it (except Sweden).
Peak Oil is well worth finding out about...for all you readers. I would highly reccommend the primer.
I believe the oil companies will benefit come what may. Today, renewables will not provide the energy we've been using from petroleum (oil & nat gas). To make it come close (and there are other issues like finding an adequate energy carrier), we need to invest an enormous amount of our petroleum energy into it (for the manufacture of solar cells, windmills, etc) which would mean that not enough petroleum would be left for the economy. It is a tough problem, and there are many believable doomsday sites which predict all sorts of nasty futures.
I think the thrust of your win-win scenario (forgive me if I've misunderstood you) is that with the right taxation we can preseve our quality of life with a combination of market efficiency and conservation. Perhaps true if you're looking at global warming, but Peak Oil proponents claim that this will only result in pushing the point at which oil peaks, with the same attendant issues subsequently.
To make it come close (and there are other issues like finding an adequate energy carrier), we need to invest an enormous amount of our petroleum energy into it (for the manufacture of solar cells, windmills, etc) which would mean that not enough petroleum would be left for the economy.
I don't think that is a significant concern. The actual amount may be enourmous, but we have enourmous resources to throw at it. If oil started running out and wind was the only alternative then the market would direct enough of the oil into making wind turbines. However, I believe it is coal rather than oil that will provide most of that energy anyway.
I think peak oil is a good thing. The sooner we run out the better, provided we don't switch to something worse. Unfortunately I don't think we are going to run out fast enough, and the options that are worse for the environment (switching to coal) will be cheaper.
You are right that it is a win-win scenario, especially in the early stages. It might be possible to address global warming adequately without leaving this win-win territory. But if we do make a wholesale switch to renewables then there will be some real economic cost.
On the front page of today's paper is an article claiming that a 50% reduction in emissions by 2050 would reduce our 'real' income by 20%. I'm not sure what assumptions it makes however, and these models usually overestimate the cost because they underestimate the creativity of the market in solving our problems.
peak oil & global warming September 01, 2006 10:57 PM
I think peak oil is a good thing. The sooner we run out the better, provided we don't switch to something worse. Well said! Most environmentalists salivate over Peak Oil. They can't wait for it to be here. Not only will we have less energy to burn, we'll have less energy to fuel our copious consumption and waste. Also less energy to extract non-renewable material at the frenetic pace we're doing it at today.
That said, I don't share your sanguineness.
I maintain you have to consider both these problems together. Both these arise out of mankind's (and the market's) indifference and false optimism for the future. "The market will take care of it" is an oft-expressed dismissal of most environmental and sustainability activists' concerns.
The environment is what it is today largely because people cared more about their comforts than their grandchildren's. The same will be true when peak oil hits. If oil gets very expensive, people will use coal for electricity and natural gas for transport, maybe in conjunction with ethanol and the like. More mountaintops will be lopped off in search of coal. More pristine wilderness areas will be spoiled for a few million barrels of oil (or a few trillion cubic feet of Nat Gas). This is what the market does so well.
And just because we burn less energy doesn't mean we can't spoil our environment in other ways. Our air may be safer to breathe, but we may kill off our oceans...we're already well on our way.
True cost, what I was referring to earlier (in terms of environmental damage and other factors) can only be taken into account when you have a clear unrefutable picture of the future. And the rogues & fools will always interject their own contrary viewpoints and muddle this picture. Just like Exxon Mobil and the oil companies have successfully managed to make global warming, in most Americans' eyes, a "scientifically contested" theory.
Sorry if I am ranting...or being so negative. I just have so little faith in top-down implementations when democracies are so easily manipulated. Gamed systems are rarely fixed by attempting to rewire them...I still think we need grassroots awareness and actions played out in a bottom-up approach.
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