Wednesday, March 05, 2008

Cap and Trade, Green Tax Switch, Ineqaulity and International Climate Funds.

A short time back i was asked to contribute one simple policy to a website called 'day one' that is seeking to concentrate suggestions for day one of the next US presidency.

My suggestion was:

"I suggested taxing pollution more and income less. Income tax would be
reduced most at the lower levels of income to overcome the regressive nature of a carbon tax. This 'green tax switch'is one no brainer that every country
should adopt in combination with other measures."

After all my recent reading and video watching on ineqaulity recently I think it's fair to say that i would go beyond simply balancing the regressive nature of a carbon tax with the progressive nature of income tax cuts for the poor. I would create a dramatically progresive system to counterbalance both structural economic feature disadvantaging the poor and the current tax system that steals from the poor to give to the rich.

I would like to thank Christopher Mitchel for passing on this link to me. The New Rules Project sketches out a cap and trade scheme based on an auction of permits with the revenues being recycled into the economy as suggested be me for a carbon tax.

It really dosent matter to me if this scheme is followed or a carbon tax approach is used for funding tax cuts for the poor. What i would say is that both a carbon tax and a cap and trade scheme are needed, and one of them will need to fund projects agreed on internationally. Adaptation and clean development in the global south require significant revenues. Politicians have proven appauling at looking through their domestic budgets and finding a little slack so they can fullfil their international responsibilities. However the EU ETS and some US cap and trade schemes are considering a hypothication of auction revenues for international commitments. I think that this is sensible and that as cap and trade systems are likely to all function under a post-kyoto framework it seems logical if not absolutely nessicary that they provide the funds and that a revenues neutral but progresive carbon tax recycling schemes can be a purely national matter.

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At 2:34 AM, Anonymous Anonymous said...

If you have both a cap and trade and a tax, you have extra government nonsense and thus alienate small government types.

Use a carbon tax to replace an existing tax, and you have a shot at getting more small government types on the bandwagon.

In the US, payroll taxes are regressive, so replacing payroll taxes with carbon taxes is mostly a wash. The link I just gave gives some approximate rates needed given different rates of resulting conservation.

You might need a small rebate to keep those at the very bottom from getting hit hard -- especially the retired, since they don't experience the corresponding tax cut that comes from eliminating payroll taxes.


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