Question: Wouldn't a carbon tax be regressive?

[garybeck]

I was at a debate between the governors for Vermont and the Republican candidate Brian Dubie made a shocking comment that he would be in favor of taxing carbon use. Personally I don't really think he meant it. I think it slipped out because he was at a Renewable Energy Conference. And he admittedly doesn't think humans cause global warming, so if that's the case, why tax it? Well I guess the problem is I'm trying to introduce logic into the Republican mindset.

Regardless it got me to thinking, wouldn't a carbon tax be regressive? Wouldn't it hurt lower income people more than higher income people? Wouldn't we presume that any taxes on manufacturing or other sectors would be passed on to the consumers at a flat rate and would be in effect regressive?

[BeFree]

1. Consumptive taxes are good

The more you consume the more you pay.

That way you have a choice.

Consuming more and causing more pollution? You pay more.

[garybeck]

2. that's one way of looking at it. however the truth is

there are many low income people who have to heat their homes. they can't afford a new heating system. they're not "choosing" to drive more or less. it is survival. and many of these people are driving old cars that don't get good gas mileage because they can't afford a new hybrid. they're already driving as little as possible, just to get to work and the store, because they can't afford the gas today, before there's a carbon tax. many of these people already today are having to choose between heating their homes and buying food, or the presecription drugs they need. Any increase in gas and heating costs would hurt them the most.

[GliderGuider]

4. It's always possible to provide a low-income exemption

Income taxes work that way - there's an outright exemption for basic needs.

[garybeck]

6. how does that work?

is it like everyone is given a basic alotment, and if you use more than that, then you have to start paying the tax? I just don't see how that can be done logistically when the tax is basically paid at the pump, or when the fuel guy fills up your heating tank. Maybe there's a tax deduction or something like that, but the fact is a lot of these folks don't pay any taxes already because they're not making enough money.

[GliderGuider]

8. Perhaps a "Fuel Purchase Card"?

You get a card and use it to pay the taxes for all fuel purchases. It comes with your year's exemption money on it, and if you want to use more you have to top it up yourself.

Clunky, but it's all I can think of off the top of my head.

[garybeck]

10. I'm sure there are a few ways to handle it. I'm just concerned that

they'd just slap a tax on it without accounting for the regressive nature of it. hopefully they wouldn't do that.

I can think of a few ways to handle the exemption. Why not have a formula on the tax form? Input the number of miles you drive to work each week. Add 100 miles for the grocery store and other necessities. Log your home heating fuel purchases. Subtract these as a standard deduction, perhaps only if your income is below a certain point.

The more I think of it, however, it might be easier to give tax credits to good uses of energy, rather than taxing bad uses of energy. You accomplish the same, but there is no concern of regressive taxes and hurting the poor.

I think any device that reduces carbon emissions should have some kind of incentive.

[GliderGuider]

11. Any such tax would be so controversial that they'd definitely think before applying it.

Carbon taxes are a third-rail issue much like population reduction proposals. No politician is going to wander into that mine field unprepared if they want to survive politically.

[alc]

9. yes, they are talking subsidies or rebates

There are different ways it could be specified in the legislation or implementation. It would be similar to the health insurance mandate. Everyone has to pay but low-income earners get it back. The tax collected by higher-income earners would be used to fund the rebates.

For home utility bills it wouldn't be too hard since you have a record of tax you paid. It would be harder with gas since you'd need to keep track of each fill-up. I haven't seen any discussion of an "allocation" where low-income earners would get $X back no matter what. It's all based on payments which implies you need to keep track of payments.

Even with this, it is regressive. I haven't seen an exemption for public transportation (though it's possible) so that will cost more. Plus, manufacturing, shipping, and retail costs will rise which means product costs will rise. And for the tax to be at all useful in reducing use, it needs to be painful. If it's just a revenue collecting mechanism (which it seems like they are going for) it will just increase cost but have no significant affect on use.

[BeFree]

5. I know

We are screwed no matter what. GW is going to impact us the most.

Am hearing something like a great fiddling in the air. The horizon glows, but all I hear is some fiddling... .. .

[wtmusic]

3. That's why fee and dividend is a much better approach.

Yes, all carbon use would exact the same flat fee. But those who use less carbon - including, presumably, people in poverty with smaller houses to heat, fewer cars to drive, and no overseas vacations - would get a disproportionately fat check from the government at the end of the year. In most cases they would actually profit from the program.

An overview of fee and dividend:

http://www.climatelobby.com/fee-and-dividend/

[garybeck]

7. thanks I will check that out. there has to be something to

reduce the regressive nature of a tax on a product that has both NEED and LUXURY uses for both POOR and RICH people.