1. Jay Tyson says

    It’s good to see more commentators getting supporting the Carbon Tax. To gain support from the broadest political spectrum, it will be necessary to state clearly that (1)the funds raised will be used for paying for the costs of rebuilding areas damaged by climate-change events, keeping insurance rates at conventional levels & taking add’l protective measures and (2) the rate will be adjusted periodically according to how much money is needed.

    The first is needed because, while conservatives are generally reluctant to support an additional tax, raising taxes to pay for external costs caused by a particular product is squarely in keeping with conservative economic theory and is supported.

    The second is needed to protect against climate-change nay-sayers: Clearly, if the recent events are just a temporary aberration, and there will be few if any such events in the future, then this tax rate will decline to zero soon enough, since no one will be drawing on the revenues raised. So the climate-change nay-sayers would have nothing to worry about.

    I realize that planning is easier if a rate were constant and locked in, but if the rate is not responsive to the demand, it will be seen as a conventional tax in disguise and all sorts of opposition will arise. If the rate is designed to be reset every 5 years or so, that would allow enough time for planning. Moreover, if a formula was established which allowed people to accurately predict the upcoming rate adjustments based on the payouts that were needed during the previous years, it would take a lot of the uncertainty out of the picture. (And rate adjustments would not be subject to the whims of future politicians.)

Last modified: January 21, 2013