Yes, I’ll support sensible anti-global warming policies, as long as it’s a carbon tax, and as long as it’s revenue neutral.
Yes, I’ll support moving toward taxing consumption, as long as it’s as progressive as the current tax regime.
Environmentalists get annoyed by conservatives putting up preconditions that are unlikely to be met in reality. I get frustrated by the fact that our measures of tax progressivity are flawed on so many levels that it will be impossible for a consumption tax to look equally progressive, even if it is equally progressive.
Over the next decade or so I’ll make a fairly steady upper-middle class income from teaching in a college. Then I’ll suddenly be “rich” when I sell my house, and earn a vast capital gain. (I bought the house in 1991, and it’s a two family.) If we replaced the current income tax regime with a progressive payroll tax that hit me equally hard over that decade, the new tax regime would look far more regressive, even if (by assumption) it was equally progressive. That’s true for all sorts of reasons:
1. My capital gain was already taxed once as wage income before I invested the funds, and should not be taxed again.
2. Even if real capital gains should be taxed, I get taxed on nominal gains.
3. The actual gains occurred in small amounts over many years, I’m just paying the entire amount at the point of sale. Nothing objective about my economic “class” changed the year I sold that house and bought a new (retirement) house of equal value.
For all these reasons the income tax looks vastly more progressive than it really is. And for all those reasons (and many others) progressives will see any “progressive consumption tax” proposal as coming up woefully short, when compared to the current tax regime, even if it is equally progressive using proper inequality metrics–i.e. in terms of consumption. The official tax data will show someone making a couple hundred thousand dollars in capital income (when I sell out), and only paying tax on wage income.
This makes me very pessimistic about the prospects for meaningful tax reform.
And as for effective anti-global warming measures—not happening.
From tax reform to monetary policy to environmental policy, far more of our policy failures are due to cognitive illusions (as opposed to special interest groups) than is generally acknowledged.
PS. The recent Obama tax increase gave me an incentive to let my rental unit lie empty for 2 years. Taxes don’t just cause workers to become unemployed, they cause capital to become unemployed.
PPS. I just noticed this excellent comment by Matt Yglasias:
The fact remains that if you tax rich golfers’ income and give the money to poor people, you increase the sum total of felicity in the world. If you find a way to collect the same amount of money from rich golfers but do it primarily by taxing rich golfers’ consumption, then you do an even better job. When you think about physical disabilities this becomes particularly clear. We try to help out people who are blind or who lost a leg in Iraq or who are born with a congenital heart weakness not because providing such assistance accords with a principle of merit, but precisely because people who lack “merit” in the field of seeing or walking or not dying as a child due to heart failure are the people who need help. But lots of people suffer from less visible problems, be it a genetic weakness for alcoholism or the below-average intelligence that afflicts exactly 50 percent of the population. Those people should have great lives, too. But a very egalitarian society in which everyone enjoys a high standard of living is almost certainly going to have become that way precisely because it doesn’t strive to turn the remorseless meritocracy of the PGA tour into a model for society.
BTW, it’s really easy to tax the consumption of rich golfers without taxing their income—just put a progressive payroll tax in place, and consider golf winnings to be wage income.
PPPS. Commenter Steve sent me a Bloomberg radio interview of Thomas Moore and Erik Larsson from the Bentley Fed Challenge team (which took second place in the national competition) and also one of the two coaches, Aaron Jackson.