Roy Morrison: Tax Bads, Not Goods
An interesting article by Roy Morrison: "How Can We Be Prosperous Without Being Destructive? The 21st Century Challenge"
Economic growth can mean ecological improvement, not ecological destruction. A market system can be prosperous and sustainable. This is not an oxymoron.
We don't need either new inventions or social upheaval to make it happen. Here's a plan for sustainable prosperity based on the democratic adoption of new 21st century market rules....
The concept's simple. End all taxes on income. Instead, tax pollution, depletion, and ecological damage. I'll say it again. Abolish income taxes and the IRS. Phase in new ecological consumption taxes on all good and services. The more polluting, depleting, and ecologically damaging the good or the service, the higher the tax....
If we must do but one thing, and that one thing above all else, we need to make what is polluting, depleting and ecologically destructive charge its true costs. It will therefore become more expensive than sustainable alternatives. In capsule summary, for markets to work sustainably, we need to get the prices right....
Ask free market avatar Milton Friedman, and he'll admit that the one flaw in the market ointment is what economists call externalities. These are the costs not borne by the sellers of or services, but shifted to others, whether it's those down wind of polluting smokestacks or to future generations that suffer the effects of pollution....
Markets themselves are not the problem. But the rules governing our current industrial market are. Existing market rules allow polluters not to pay or charge their true costs. We have ignored what markets do best, that is, the powerful relationship between price and demand that can be the primary instrument for sustainable prosperity.
It seems a wonkish question amidst the warnings of looming climate catastrophe, peak oil induced economic collapse, habitat destruction, and species extinction, with some suggesting that homo sapiens may be added to that list. All we need to do is get the prices right? Not mandate technological marvels, or apply a postal manual of regulations to all aspects of human behavior, or lay mine fields along the borders and build a missile shields in the sky above....
Get the prices right, we won't have to argue about the wisdom of Kyoto Protocol on global warming. Make what is polluting, depleting, and economically damaging more expensive and maybe we someday can say with a straight face, "I'm looking for bargains as part of my work to help to save the planet."
posted by Kevin Carson | 11:06 AM
11 Comments:
I'm in favor of green tax shifting. But it's important to keep in mind that cost (and benefit) internalization can come about through taxes or through a change in property institutions. We should favor getting the property relations right as a way to get the prices right. One part of that move, in my view, is to work to revive the idea of the commons and then work out the appropriate rights so as to avoid the tragedy of the unmanaged commons.
I don't get it. Who has the right to tax someone else for his depletion of something? What's wrong with the price system and real Lockean private property? You known damn well the political process will use such an excuse to tax to oppress even more. Let's not make its job any easier. We'll have a depletion tax and all the others too. No thanks. Taxation is theft. Tyranny is tyranny. Even the allegedly green variety. Internalize the externalities!
ALthought I may agree with the idea of abolishing taxes, I am always supicious of those who say demand the end of income tax, and acept the existence of all others. Sounds like possible case of "vulgar libertarianism" to me (usually income taxes affect the rich more, after all)
Actually, Sergio, I don't think income taxes affect the rich more. They mostly land on the middle class.
Of course a lot of other taxes hit the poor, and should be immediately abolished without question. Regressive taxation is an abomination.
Income tax is particularly bad IMO, because at the margins what it does is prevent new wealth from competing with old wealth, which is really bad.
I think a land tax or some other tax that falls on existing wealth, rather than income would be "better", if we had to choose.
Sheldon: I'm sympathetic to that viewpoint, but it is possible to say that one would rather be pickpocketed than burgled. Both are crimes, but one is much more severe.
Ideally, we would have anarchy and people would negotiate a property regime that works for them.
mdm,
For me, anyway, a resource extraction tax is a step towards a better property rights regime. As I said somewhere, I'm a Georgist tomorrow and a Tuckerite the day after tomorrow. Ultimately, I'd like to see a system where ordinary land tenure is based on occupancy and use, and specially limited resources like minerals, aquifers, etc., are treated as local commons. An extraction or severance tax is a way of recognizing the latter principle in the transition period.
Sheldon,
Well, I'm not a Lockean. Of the three major free market libertarian property rights regimes--Lockean, Tuckerite and Georgist--Lockean comes in dead last for me. Of course, genuine Lockeanism would be a big improvement on the legitimacy of many current statist land titles. But as I said above, my ideal end state would be one where mineral resources were commonly owned by local communities or bioregional federations of communities. Ultimately, severance taxes would simply become a form of geolibertarian rent to the owners of the common.
Sergio,
If the income tax is abolished over a period of time, it should be done by increasing the personal exemption and leaving more and more people out of it from one year to the next. In the meantime, the best way to go after unearned high incomes is to go after the privileges that make those incomes possible, rather than using taxation as a corrective. By the time the phasing out of the income tax reaches those at the top, the withdrawal of privilege will have started to have an effect on ironing out the great disparities of wealth, and there'll be a lot less to tax anyway.
Adem,
I agree. But again, I see green taxes as a preliminary recognition of the principles entailed in a new property rights regime--not as a substitute for it.
The only time the income tax seriously touches anyone well-off anyway are the rare ones that get there though hard work & saving. Most truly rich people have their money in investment, which gets taxed a lot less.
I've thought about other alternatives to the current tax system before, but never quite fleshed them out. For example, at one time I considered "suppose there was ONLY a corporate tax?", figuring since they're the ones getting benefit from the State they should be the ones that pay for it. Sorta tossed that one off expecting comment but no one bit the worm.
b-psycho,
Actually, my reaction to the corporate income tax is kind of like yours to the personal income tax. Corporations don't actually pay it.
And it has some insidious effects. It drastically heightens the difference in privilege between favored and non-favored enterprises. Without the corporate tax, tax benefits like the R&D tax credit, the interest deduction for corporate debt, and accelerated depreciation couldn't exist. At present, because of these things, companies engaged in capital-intensive, high-tech production and most heavily involved in mergers and acquisitions pay a disproportionately small share of the tax compared to the classic NAM base of small and medium-sized, labor-intensive firms. And what little tax they do pay, they're more able to pass on to the consumer, since they are in predominatly oligopolistic market structures.
So myself, I'd prefer doing away with the corporate income tax altogether, or at least closing all the loopholes and lowering it enough to be revenue-neutral.
Of course the sole-corporate tax would be worthless if there were loopholes. I'm sure you know there's companies that actually get back more than they pay in corporate tax because of the handouts they get.
Another idea I had was aimed at encouraging non-state alternatives to social welfare: make all taxes that go towards government dependance programs voluntary (i.e.: you want the program, you pay the tax; you don't want it, you don't pay for it). The idea behind that one is that as long as government is going to exist -- and changing that would be a long-term thing -- it should have to essentially function in that regard no different than any private setup for the same purpose. Over time, as people re-embraced the idea of non-state aid, they'd simply withdraw from the gov't system.
Not saying I endorse either of these, just fishing for thoughts. It's kind of an oddity of how I think that I'm so sure of what I DON'T want.
BTW: the image verification thing seems to have a glitch where it loads twice (I put in the word & hit publish, then it reloads with a different word instead of posting).
I broadly agree with most of what is expressed above. The tax approach is the "Pigovian" one, and the property approach is the "Coasian" one.
Both have - often hidden - costs associated with running them. The property approach has fewer by and large, because property is a natural concept for human beings. But when - as here, most likely - it involves policing and enforcing artificial legalistic notions, those costs go way up and require an enforcing state or quasi-state.
The property approach has the further defect that there is a wealth transfer when the property rights are created, and this is usually not compensated for properly at the time.
The tax approach - as with Georgism - forgets the history of transfers of use and so on, so that it easily hits third parties rather than the original gainers from the unpoliced externalities that used to obtain; they have long gone with their gains. (It gets really serious with Georgism.)
One shouldn't come away with the idea that fixing any one externality or other market imperfection will make things better overall. It can happen that the remaining ones combine in a worse way, particularly if the process of reform is prioritised by rent seekers - they may be prioritising getting rid of tourniquet temporary fixes without fixing what those addressed.
One final thing. It's wrong to say that externalities are the rather than a problem with a general market approach. They are just the largest one around at the moment. Of course, state solutions funded by unhypothecated (i.e. uncommitted) tax revenue tend to create yet more externalities - like the state policing of new property rights.
It strikes me as too much like thinking (say) that 18th century kings were the source of all problems and plumping for a "virtuous" republic.
Mutualism runs that risk too, of supposing that corporations are the only way to institutionalise bad behaviour (my own greatest personal misfortunes of that sort were at the hands of those official good guys, the Red Cross, and of an unethical partnership firm of accountants).
P.M. Lawrence,
I agree that the state is a great generator of externalities. I'd go so far as to say it's the main one. And eliminating state activities that create existing externalities should always be the first order of business, before trying to use the state to internalize them. That's especially true of land values. Operating public utilities and transportation on a cost basis would internalize a lot of externalities, along with reversing some of the sprawl that creates shortages of favorably situated land. Fees for extraction of resources and civil penalties for pollution are, IMO, just an adjunct of a property system. The former follows from treating scarce resources as a common; the latter is compatible even with straightforward Lockean property rights.
On the issue of the Red Cross, btw, I see such charity establishments and non-profits as very much a part of the corporate system. Check out Paul Goodman's contrast of them with genuinely decentralized, bottom-up mutual aid associations. The corporate form of organization, as a hegemonic norm, has contaminated the big establishment charities: the multiple layers of hierarchy, the "professionalization" of staff and prestige salaries (e.g., recruiting resume carpetbagger Liddy Dole as CEO), the corporate jargon and mission statements... internally, they're indistinguishable from a for-profit corporation.
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