Saturday, May 9, 2009

Reduce other taxes to soften impact of Carbon taxes

Legislators and the scientific community are in agreement that some economic incentive is needed to discourage carbon emissions. There is considerable debate, however, that adding costs to fossil fuels, via a carbon tax or a carbon cap-and-trade system, will crush industry as it wobbles to its feet in these precarious economic times.

The question is: Does the government need more money?...or do we simply want to incentivize cleaner energy use? If the government were to hold its revenues constant - gradually phasing in a carbon tax while proportionally reducing income tax and corporate tax, the net effect would be a win-win.

The government would collect the same amount of revenue, the carbon tax would discourage fossil fuels and raise the cost of business, but a corresponding decrease in income & corporate taxes would compensate by raising spendable income.

A large obtacle may be the accounting and paper work behind the scenes to balance the budget, but come on - we're smart people. Let's figure this out. Any thoughts? Please discuss in the comments.

CATEGORY: Political / Economic / Energy
IDEATION: April 28, 2009


  1. Huh... very interesting. I'd never really looked at the US government's sources of revenue before... I would have thought corporate tax was a much larger portion of it. Do cap and trade laws directly affect individuals at all, or would those taxes be passed on through gas taxes, etc.? I guess I've always heard cap-and-trade laws applied to corporations, but perhaps that's just a simplifying move to make it easier to manage the system.

    Anyway, I like the idea, quite a bit. I would say, however, that the decreases in corporate/income taxes should decrease at a slower rate than the carbon tax increases, because, in many cases, businesses are able to realize substantial savings by employing more energy-efficient methods of operating. So, if the increases to carbon taxes and the decreases in other taxes were equal, the government would lose money if companies did lower their carbon emissions. I think there should be a balance, wherein companies who do nothing see their overall taxes rise, while companies that are pushing the edge of being "green" should see them lowered.

    All in all, though, I think it's a great idea. This is seriously something that would be worth passing on to and/or your senators.

  2. This would end up being a regressive tax on poor people and I dont think the government is going to give up a base to tax from any time soon. Also this would only work if all nations did it as well. The US would be shipping out even more manufactiring jobs if this happened.

  3. well - the carbon costs may do that, yes - but i'm proposing a way to alleviate the effects by reducing other taxes

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