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September 18, 2006

Green taxes

Writing about web page http://whitherward.blogspot.com/2006/09/green-taxes.html

(This entry is being posted on this blog and my new blog Whitherward as this one will disappear within a month or two I think.)

Apparently Menzies Campbell wants to scrap the Lib Dems policy of a 50% rate of tax on earnings over £150k in favour of “green taxes”, that is taxes on polluting behaviour. Given this, it seems like an appropriate time to ask the question: are green taxes sustainable?

Now, since he is proposing scrapping the 50% policy in favour of green taxes, he clearly expects to use the expected revenues generated as a basic part of his budget. Someone (I can’t remember who I’m afraid, it might have been Chris Doidge, but it might not), pointed out in an earlier conversation that either these taxes raise lots of money, in which case there must still be lots of polluting activity, or they fail to raise lots of money, in which case there would be a budget shortfall. Strictly speaking this isn’t true, it could be the case that you could expect to reduce polluting behaviour but not eliminate it, and anticipating the reduction in polluting behaviour as a consequence of these taxes you could estimate the revenues that would be produced. However, there does seem to be something slightly perverse about this (and do we really believe that they’re capable of doing these sorts of calculations?).

There is another problem. Presumably, we would hope that in the long term polluting behaviour would significantly reduce over time, which would mean that to maintain constant revenue rates from green taxes, we would have to increase these taxes over time to compensate. As the rate of taxation got ever higher, the illogic of the tax would become ever clearer, and eventually an alternative source of revenue would have to be found. In essence, the revenue generated by the green taxes would be used, presumably, for wealth redistribution, but rather than taxing the wealthy you would be taxing the polluters which seems unfair on the face of it.

So, although I am in favour of policies which reduce polluting behaviour, and I am in favour of wealth redistribution, I am not at all sure about this policy. It seems like a short term attempt to introduce stealth redistribution of wealth, which fails to address any systemic or long term problems. Perhaps it is justified as a short term measure because of the current right wing trend in politics though?


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