Gore: Tax Pollution, not Employment
Near the end of his Nobel acceptance speech the other day, Al Gore had this thought provoking statement:
And most important of all, we need to put a price on carbon – with a CO2 tax that is then rebated back to the people, progressively, according to the laws of each nation, in ways that shift the burden of taxation from employment to pollution. This is by far the most effective and simplest way to accelerate solutions to this crisis.
Let me start by saying that I am not an economist, so I can’t even begin to tell whether this is feasible or not. To me, though, this is a singularly interesting idea. What would be the effect of eliminating income tax and instituting a pollution tax?
I imagine that the prices of all goods would increase to cover the costs of the pollution tax to the manufacturers. Those producers with lower emissions would be able to offer lower priced goods and have an economic advantage over their competitor. This should force others to find ways to reduce their greenhouse emissions to stay competitive. So that side of things passes the sniff test for me.
What I am simply not smart enough to understand is what would the affect be on the consumer? In the short term, I imagine the that this would be hardest on those making the least amount of money. They pay a relatively small percentage of their income in taxes and I would imagine the increase in costs would more than wipe away their ‘increased’ income. Over time, would this correct itself? Would the progressive rebate back to the people ease this burden?
I might have to find a way to submit this as a question to the folks at Freakonomics…
Hat tip to Raising Kaine.

