Curtailing Carbon: A Radical Solution Part Two Apr 05 '07    Write an essay on this topic. Tweet The Bottom Line A radical but sensible public policy initiative to curtail carbon! Curtailing our consumption of carbon and the associated release of the greenhouse gas, CO2, is becoming the regnant issue of our time. I have previously posted five reviews and a couple of essays on this subject, most recently an essay entitled Curtailing Carbon: A Radical Solution. I indicated my support for the general idea of establishing a worldwide "cap" for CO2 emissions, and suggested a method for dividing up this cap among the various entities who release CO2---nations, corporations, and individuals. My suggestion differs from the approach embodied in the Kyoto Protocol in a way that I thought might be perceived by some as "radical." I want to strongly indicate my support for another change in public policy. There exists a fair amount of study and writing on this idea, and it is supported by many if not most ecologists, including Al Gore as he indicated in his recent testimony on global warming before a Senate committee. In brief, the idea is to eliminate taxes on wages, interest, dividends, capital gains, and corporate earnings! All those taxes on jobs, labor and investment would be replaced by taxes on consumption of carbon-based energy and other resources. The change must be carried out in a way that is "revenue neutral," neither increasing nor decresing the total federal tax revenue. Many writers on ecology have pointed out that public policy in ALL the developed nations tends to incentivise every business to use labor as sparingly as possible---and to use resources and energy wastefully. The subject encompasses subsidies as well as taxation, but I want to focus here on taxation. It has always been a basic tenet of conservative political philosophy that the income tax is a disincentive to employment and to economic expansion. Now many ecologists and some liberals are seeing that the present tax system discourages employment of labor and encourages profligate use of energy and other resources. Some are advocating a gradual elimination of taxes on income and investment returns, to be replaced by taxes on the use of carbon-based energy and other natural resources. Such a change in tax policy would result in market pricing of energy and resources that would be more consistent with their real value, in light of the fact that they are virtually irreplaceable. The change would be implemented gradually in stages over about twenty years in a way that would allow all the existing elements of capital equipment infrastructure to live out there useful lives. As taxes on energy and resources increase and they become more costly all of industry will be strongly motivated to hire more people, use more labor, now that it would be much less expensive, and use less energy and resources, now that they would be much more expensive. The elimination of taxes on investment returns will make many more kinds of investment attractive, especially for those kinds of research and development investments that will allow much more efficient use of energy and resources. The goal of this gradual transition away from taxes on labor to taxes on resources is a radical improvement in energy and resource productivity to replace the current focus on labor productivity. The structural change in taxation will need to be carried out in a way that does not drastically change the distribution of taxes on different economic strata, preserving the progressivity of taxes----higher tax payments by those who are the most productive, lower payments by the less productive. Change in the attitudes and practices of every kind of business would be immediate and profound as this transition is put into place. Some have predicted a ten-fold improvement in resource and energy efficiency, while creating millions of new jobs at wages comparable to the present, or higher, while labor becomes much less expensive in relation to energy and resources. It's a truly radical idea---but think about how sensible it is!

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