Thursday, July 5, 2012

Pigou and Canada

The NY Times has a piece by some academic types regarding the use of a carbon tax, yes a Pigou type tax, in Canada. They write:

ON Sunday, the best climate policy in the world got even better: British Columbia’s carbon tax — a tax on the carbon content of all fossil fuels burned in the province — increased from $25 to $30 per metric ton of carbon dioxide, making it more expensive to pollute.

This was good news not only for the environment but for nearly everyone who pays taxes in British Columbia, because the carbon tax is used to reduce taxes for individuals and businesses. Thanks to this tax swap, British Columbia has lowered its corporate income tax rate to 10 percent from 12 percent, a rate that is among the lowest in the Group of 8 wealthy nations. Personal income taxes for people earning less than $119,000 per year are now the lowest in Canada, and there are targeted rebates for low-income and rural households.  

Well this is not what I thought Mankiw was pushing, and I suspect ultimately Romney. They, I believe, want to just add another tax, a tax which is highly regressive, on anyone using petrol fuel. If I read this article correctly this tax is in place of an income tax. It still is a highly regressive tax not withstanding. But who ever heard of any Government lowering taxes when they get permission to add a new one. Never happen, not in this country.

This Pigou tax is to disincent use, when there is no rational alternative. Taxing weight, carbs, whatever makes more sense and we can track the positive effects ounce by ounce.