The Case for a Carbon Tax
Posted on September 17th, 2007 in Uncategorized | 5 Comments »
In the Times, Harvard economist Gregory Mankiw joins Al Gore and calls for the implementation of a carbon tax, and using the revenue gained to cut payroll taxes.
Yet this natural aversion to carbon taxes can be overcome if the revenue from the tax is used to reduce other taxes. By itself, a carbon tax would raise the tax burden on anyone who drives a car or uses electricity produced with fossil fuels, which means just about everybody. Some might fear this would be particularly hard on the poor and middle class.
But Gilbert Metcalf, a professor of economics at Tufts, has shown how revenue from a carbon tax could be used to reduce payroll taxes in a way that would leave the distribution of total tax burden approximately unchanged. He proposes a tax of $15 per metric ton of carbon dioxide, together with a rebate of the federal payroll tax on the first $3,660 of earnings for each worker.
This is such a smart ideaâand payroll taxes are regressive, anywayâthat it will almost surely never happen. (Sorry, that was cynical.)
What’s really interesting is that Mankiw is an adviser to Mitt Romney, who has been vociferous in his opposition to any new taxes….
5 Responses
9/17/2007 11:28 am
A carbon tax is a great idea, one which is probably impossible to make happen. But the problem with Mankiw’s piece - and it’s a big problem - is that a $15 ton carbon tax doesn’t get you very far. To get to the level of reductions we’re going to need, it’s going to need to be closer to $40, meaning offsetting tax reductions would need to be greater too. And that is going to be even more impossible to get done… at least without a lot of voter education about what the (worse) alternatives are.
9/17/2007 12:38 pm
Let the market clear the cost and the mitigation. That republicans are calling for carbon tax suggests that they are afraid that in a market environment their companies will have added cost burden. In a tax scenario it is “liberalised”-how perverse.
Understand the issues before recommending a course of action!
9/17/2007 2:15 pm
Anyone want to take bets on how long it takes for Mankiw to resign/be fired as an advisor for Romney? I guess a few days at best
9/17/2007 4:37 pm
No later than the end of the week.
If Craig makes it back will he still be Romney’s guy in whatever state he represents? Or did that bus back up over him and kill him dead?
9/19/2007 1:14 am
How smart can Mankiw be if he is an advisor of a hollow man like Romney, who stands for nothing but himself?