I've been banging on for some time now about how various people seem to massively misunderstand green taxes. Most especially, the way in which everyone seems to think that the green taxation of petrol should mean higher taxes than we already pay. As I've said repeatedly, if you work through the numbers from the Stern Review ($85 per tonne CO2-e) you end up with the correct emissions taxation of a litre of petrol being 11 p. We already pay north of 50 p a litre. Yes, there are other things that need to be paid out of that: the cost of roads, noise and particularate pollution and so on, but the fuel duty escalator has, since 1993, added 23 p a litre in tax to pay specifically for the costs of those carbon emissions.Worstall claims that he's been feeling so lonely saying these things ... until now.
Now the Institute for Fiscal Studies has released a press release saying
The UK's green taxes should be reformed to achieve their environmental objectives more effectively, but policymakers should be wary of calls for a big increase in green taxes to finance a significant shift away from the use of other taxes. So argues a study commissioned by the Mirrlees Review of the UK tax system, which is being chaired by Nobel prize-winner Professor Sir James Mirrlees for the Institute for Fiscal Studies.The release go on to say
The authors note that road fuel duty is much higher in the UK than the environmental cost of vehicle emissions would appear to justify. The overall level may be justified by the much greater costs of congestion, but taxes on fuel are a very blunt instrument for dealing with this problem. This suggests that a national system of road pricing should be introduced as soon as it is administratively and politically feasible, with the revenue raised from it offset by cuts in road fuel duty.Worstall continues by pointing out
There's a larger point to be made here. Whenever someone comes up with an argument that implies an optimal level of taxation (and this could be for green reasons, for equity, for moral purposes, whatever) it's always worth examining exactly what that optimal level is in relation to the taxes we already pay. For yes, there will of course be an outcry that this optimal level means we should increase taxes: but the truth is that as often as not we're already paying higher than that optimal level. (Emphasis added)Now there's an interesting idea, we could be paying to much tax.
2 comments:
I've been banging the same drum for a good two years myself to anybody who will listen.
The fact that this arguments gains so little traction tells me two things. One, almost nobody understands the idea of efficient pollution. Two, for people pushing green taxes, raising taxes on energy has nothing whatsoever to do with economics. Economics is the excuse, but not the reason.
Which is why Bryan Caplan is right on the money.
Matt: You're right I don't think many people do get the idea efficient pollution. Most people seem to think that the optimal amount of pollution is zero. They don't trade off the costs of pollution reduction against the costs of pollution itself. Pollution is just bad, therefore we should have none of it. I thought it interesting that environmental taxes were too high. I would have guess the other way.
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