[mike777]

cherdano, on Nov 12 2008, 01:30 PM, said:

luke warm, on Nov 12 2008, 12:05 PM, said:

ok, let's say a carbon tax is implemented... richard (if i read him correctly) thinks this would result in a net benefit to the economy... i'm having trouble seeing how... what would happen to all goods and services if such a tax was implemented? i assume the 18 wheelers would take a big hit, right?

As an example (this has been done in Germany), let's assume that the carbon tax is used to subsidize employer's share of employer-covered health care costs. This would mean companies would try to reduce their carbon production, but they would be more willing to hire, since the health care costs associated to hires is lower.
So more would be spent on wages, and less on "sending money to countries that don't like us very much". The new employees are more likely to use that money to buy American goods than oil barons in the Middle East. (I think this is how McCain would try to sell a carbon tax.)

This only works well though when there is a clear long-term commitment to increasing the carbon tax, so that companies know that investments into reduction of energy consumption will pay off (instead of becoming worthless once the Republicans regain control of the government).

This sounds great. If a carbon tax can clean up the environment and create jobs with decent health care benefits and higher wages, sign me up. Hopefully if it works in Germany it will work here.

[helene_t]

mike777, on Nov 12 2008, 08:57 PM, said:

Also I assume you can burn or capture carbon in many different ways which would release different levels of co2 into the atmosphere. It seems you would need a vast bureaucracy to enforce, collect and measure all of these different levels.

Nope. It doesn't matter how it is processed. The reaction is always

C + O2 -> CO2

no matter which fuel we are talking about and how it is used.

Therefore it is the simplest tax one can imagine (OK, maybe a flat per-square-meter property tax would be even simpler).

As for the impact on the economy, I doubt it would be much better or much worse than alternative taxes. But if something is to be done to reduce CO2 emisions, then I think a flat carbon tax is the best way to do it.

[mike777]

helene_t, on Nov 12 2008, 03:30 PM, said:

mike777, on Nov 12 2008, 08:57 PM, said:

Also I assume you can burn or capture carbon in many different ways which would release different levels of co2 into the atmosphere. It seems you would need a vast bureaucracy to enforce, collect and measure all of these different levels.

Nope. It doesn't matter how it is processed. The reaction is always

C + O2 -> CO2

no matter which fuel we are talking about and how it is used.

Therefore it is the simplest tax one can imagine (OK, maybe a flat per-square-meter property tax would be even simpler).

But can't you do something to limit the reaction when burning carbon? Also assuming you cannot I would think a business can still limit emissions into the atmosphere through recapture, conversion or recycling the CO2

[hrothgar]

mike777, on Nov 12 2008, 11:36 PM, said:

helene_t, on Nov 12 2008, 03:30 PM, said:

mike777, on Nov 12 2008, 08:57 PM, said:

Also I assume you can burn or capture carbon in many different ways which would release different levels of co2 into the atmosphere. It seems you would need a vast bureaucracy to enforce, collect and measure all of these different levels.

Nope. It doesn't matter how it is processed. The reaction is always

C + O2 -> CO2

no matter which fuel we are talking about and how it is used.

Therefore it is the simplest tax one can imagine (OK, maybe a flat per-square-meter property tax would be even simpler).

But can't you do something to limit the reaction when burning carbon? Also assuming you cannot I would think a business can still limit emissions into the atmosphere through recapture, conversion or recycling the CO2

it might be useful to specifically distinquish between

1. Burning fuel (and releasing carbon)
2. Sequestration (preventing said carbon from reaching the atmosphere)

[helene_t]

Quote

But can't you do something to limit the reaction when burning carbon?

No, the reaction is what releases energy so there is nothing you can do about it.

There has been some talks about CO2 sequestering. It only applies to power plants, though. Remains to be seen if it will work.

[mike777]

Here are some informational links I found on the carbon tax:

http://www.carbontax...roduction/#what


http://en.wikipedia....wiki/Carbon_tax



http://science.howst.../carbon-tax.htm

[TimG]

awm, on Nov 12 2008, 03:01 PM, said:

A combination of increased gas tax, increased price of non-hybrid cards, and tax breaks for purchasing a hybrid could easily have convinced me to go the other way.

If the government's policy is really to try to reduce our dependence on oil, shouldn't these incentives and disincentives exist?

It may be irrational, but it seems more reasonable to me to tax gas or low MPG cars to make hybrids more on a par price-wise than to give tax credits (or breaks) for those who purchase hybrids.

Nor does it seem like there should be a tax break for buying a Toyota Camry Hybrid that gets 34 MPG but no tax break for buying a Volkswagen Jetta (diesel) that gets similar MPG.

[helene_t]

Agree with Tim. Let me add: other ways of reducing emission is to commute less, or to use the bicycle, or to walk. No reason to give tax breaks to a subset of gas savers only. Keep it simple. Just tax fuel.

[effervesce]

helene_t, on Nov 12 2008, 04:12 PM, said:

Agree with Tim. Let me add: other ways of reducing emission is to commute less, or to use the bicycle, or to walk. No reason to give tax breaks to a subset of gas savers only. Keep it simple. Just tax fuel.

Taxing fuel may be all well and good in theory, but in practice not as effective unless the tax makes the price high enough to be sufficiently painful.
It is also a quick way for a government to lose votes for the next election.

When buying cars, or anything else for that matter, the initial price is a very important factor.
You can have the most efficient laundry machine, which in 2 years recoups its extra expense over a less efficient laundry machine - but if the more efficient one costs $500 while the cheaper one is $200, most people will probably buy the cheaper one even if it is more expensive over the long run.

Same thing with cars - say there is a $20 000 vehicle that consumes $100 per week in petrol, and a $30 000 car that consumes $50 per week. The extra expense is recouped in 4 years, but I'd imagine the majority of consumers will still buy the $20 000 dollar vehicle - simply because the initial cash saving is a more important factor for the average consumer than the overall cost.

That is why subsidising the price of efficient cars may be a much more effective way of reducing CO2 emissions. Tax the inefficient cars, and use that money to subsidise the efficient cars. If both cars were similarly priced, there'd be many more consumers buying the efficient cars.

[luke warm]

if you add to the price of a car, how will that affect car sales? i mean, the big 3 are already bleeding money, begging for a bailout... i can't see how increasing the cost of the vehicle helps anything

it looks to me as if the desire for a carbon tax keeps people from looking at the bigger picture (how it will affect all of us)... now i'd be all for *cutting* taxes (even no corporate tax) on companies that had safe and reliable alternative sources of power... give companies an incentive to invest and produce

[TimG]

effervesce, on Nov 12 2008, 06:05 PM, said:

Same thing with cars - say there is a $20 000 vehicle that consumes $100 per week in petrol, and a $30 000 car that consumes $50 per week. The extra expense is recouped in 4 years, but I'd imagine the majority of consumers will still buy the $20 000 dollar vehicle - simply because the initial cash saving is a more important factor for the average consumer than the overall cost.

Except that in the US cars are very often financed rather than paid for in one lump sum by the consumer. So, instead of comparing $20k to $30k, you would be comparing $400/moth to $600/month and then monthly fuel costs (and maintenance and insurance) do figure highly into the equation.

[effervesce]

luke warm, on Nov 12 2008, 01:05 PM, said:

ok, let's say a carbon tax is implemented... richard (if i read him correctly) thinks this would result in a net benefit to the economy... i'm having trouble seeing how... what would happen to all goods and services if such a tax was implemented? i assume the 18 wheelers would take a big hit, right?

The reason why people say there is a benefit is that it would increase efficiency. If releasing CO2 into the atmosphere costs nothing to an individual, they do not care how much is released. It's basically a 'tragedy of the commons' situation.

Say an item (eg a car) has a price of $x, releasing y tonnes of CO2 over its lifetime.
The CO2 release into the atmosphere, if the climate change people are correct, has a real cost, but one not immediately born by those who release it. Say each tonne of CO2 will have an environmental cost of $z dollars.
Then the real cost of the car is $x + y*$z dollars. However, the real individual doesn't care - they pay $x dollars, while the y*$z dollars is shared out over the rest of society.

Hence, carbon taxes may serve to in fact reduce the overall cost, by driving people to buy cars that release less CO2. Ie, to buy cars that in fact cost society less. If the carbon taxes are used such that taxes from inefficient machines subsidise efficient machines, society simply gains. All the carbon tax does is to make consumers pay for the real cost to society of releasing CO2 into the atmosphere. As the carbon tax is used to subsidise more efficient machines, there's no loss of money to consumers-it is simply pricing things as they should correctly be priced.

[effervesce]

luke warm, on Nov 12 2008, 06:11 PM, said:

if you add to the price of a car, how will that affect car sales? i mean, the big 3 are already bleeding money, begging for a bailout... i can't see how increasing the cost of the vehicle helps anything

it looks to me as if the desire for a carbon tax keeps people from looking at the bigger picture (how it will affect all of us)... now i'd be all for *cutting* taxes (even no corporate tax) on companies that had safe and reliable alternative sources of power... give companies an incentive to invest and produce

It is not simply trying to make cars more expensive. Using the carbon tax to subsidise efficient cars will make efficient cars cheaper. If all the carbon tax money is used in the subsidy, then there is no net loss.

If x inefficient cars pay y dollars in carbon tax, then the $xy dollars can be used to subsidise z efficient cars. The z efficient cars would therefore be $xy/z dollars cheaper.

There would, therefore, be a great incentive for car manufacturers to design and make efficient cars, not only consumers.

[awm]

luke warm, on Nov 12 2008, 06:11 PM, said:

if you add to the price of a car, how will that affect car sales? i mean, the big 3 are already bleeding money, begging for a bailout... i can't see how increasing the cost of the vehicle helps anything

it looks to me as if the desire for a carbon tax keeps people from looking at the bigger picture (how it will affect all of us)... now i'd be all for *cutting* taxes (even no corporate tax) on companies that had safe and reliable alternative sources of power... give companies an incentive to invest and produce

Suppose we said to the US car manufacturers:

The US government will pay you $10,000 for every new car you sell inside the United States which has gas mileage rated over 30 MPG in the coming year. The required gas mileage for this payment will increase slowly over the years to come according to a set schedule (i.e. in a year or two it goes up to 31 MPG and gradually higher).

This seems like it would cause manufacturers to produce more high-mileage cars and try harder to sell them (rather than pushing consumers to always buy SUVs). Designing "next generation" hybrids which will be over the MPG line for years to come becomes a valuable priority. The prices of hybrids might be cut to make them more appealing to consumers (i.e. Ford charges a bit less for each car, sells more of them, the additional government subsidy more than makes up the difference).

Of course, this would cost a lot of money, but it can be paid for by increasing the gas tax, which further encourages consumers to buy small fuel efficient cars (or large hybrids).

[onoway]

One side issue here is a straight across the board tax makes life difficult for farmers and truckers and almost everyone who lives in a rural area. It's very well and good to say take a bicycle or walk, but when it is 37 miles or more to the nearest store that simply isn't an option, unless of course you have nothing else to do with your time. (like play bridge?) An across the board tax will help to speed up the flight of the rural to the urban and put even more pressure on farmers, possibly speeding the transition to more factory farms as the family farms get turned into subdivisions.I'm not convinced that paving land to support more houses and strip malls is necessarilly a good thing. This is what's happening here, at any rate. Some might see nothing alarming about this, I'm not so sure.
This isn't a plea for the status quo, just a thought that although a straight tax is a simple and straightforward solution, it does have implications beyond punishing the use of a car to go pick up a pack of cigarettes and a movie. Maybe we will (should?) get back to the times when stores had hitching posts out the front. (Now if anyone wants to buy a horse....)

[hrothgar]

luke warm, on Nov 13 2008, 02:11 AM, said:

if you add to the price of a car, how will that affect car sales? i mean, the big 3 are already bleeding money, begging for a bailout... i can't see how increasing the cost of the vehicle helps anything

it looks to me as if the desire for a carbon tax keeps people from looking at the bigger picture (how it will affect all of us)... now i'd be all for *cutting* taxes (even no corporate tax) on companies that had safe and reliable alternative sources of power... give companies an incentive to invest and produce

In a shocking move, Jimmy comes out in favor of tax cuts...

Seriously, is there any time that you aren't in favor of tax cuts? This comment is (essentially) meaningless noise.

Can you (or Mike) give ANY examples where you think increases taxes is the right policy decision?

[mike777]

All this talk of car companies being forced or given 10K to sell a car the government prefers over what the customer wants makes me nervous. GM F and C are not going broke because they refuse to sell green cars or prefer to pollute the planet. Just take a look at the VOLT which GM has wasted so much money on and they will sell at a loss.

edit: I am in favor of raising taxes if it helps rather than hurts job creation or growing GDP. I prefer to increase tax revenue rather than tax rates if that is an option.

[hrothgar]

mike777, on Nov 13 2008, 03:34 AM, said:

All this talk of car companies being forced or given 10K to sell a car the government prefers over what the customer wants makes me nervous. GM F and C are not going broke because they refuse to sell green cars or prefer to pollute the planet. Just take a look at the VOLT which GM has wasted so much money on and they will sell at a loss.

edit: I am in favor of raising taxes if it helps rather than hurts job creation or growing GDP. I prefer to increase tax revenue rather than tax rates if that is an option.

Pablum and the laffer curve...

Try to provide some specifics. Don't you work in some field valguely related to accouting / finance?

You must be able to come up with something specific.

[mike777]

I thought I posted this before and thought it was worth further discussion. I do not know how it works in full detail.

I have no issue on raising many types of taxes or usage fees or whatever you prefer to call them. OTOH I do worry if raising a tax causes job loses or reduces the growth rates of GDP.

I do think the carbon tax discussion is interesting and the posts thoughtful.



http://www.carbontax...no-tax-increase




"A carbon tax should be revenue-neutral. Revenue-neutral means that little if any of the tax revenues raised by taxing carbon emissions would be retained by government. The vast majority of the revenues would be returned to the public, with, perhaps, a very small amount utilized to mitigate the otherwise negative impacts of carbon taxes on low-income energy users.


Two primary return approaches are being discussed. One would rebate the revenues directly through regular (e.g., monthly) equal dividends to all U.S. residents. In effect, every resident would receive equal, identical slices of the total revenue pie. Just such a program has operated in Alaska for three decades, providing residents with annual dividends from the state’s North Slope oil revenues.

In the other method, each dollar of carbon tax revenue would trigger a dollar’s worth of reduction in existing taxes such as the federal payroll tax or state sales taxes. As carbon-tax revenues are phased in (with the tax rates rising gradually but steadily, to allow a smooth transition), existing taxes will be phased out and, in some cases, eliminated. This “tax-shift” approach, while less direct than the dividend method, would also ensure that the carbon tax is revenue-neutral.

Each individual’s receipt of dividends or tax-shifts would be independent of the taxes he or she pays. That is, no person’s benefits would be tied to his or her energy consumption and carbon tax “bill.” This separation of benefits from payments preserves the incentives created by a carbon tax to reduce use of fossil fuels and emit less CO2 into the atmosphere. Of course, it would be extraordinarily cumbersome to calculate an individual’s full carbon tax bill since to some extent the carbon tax would be passed through as part of the costs of various goods and services.

Revenue-neutrality not only protects the poor (see next section), it's also politically savvy since it blunts the "No New Taxes" demand that has held sway in American politics for over a generation. Returning the carbon tax revenues to the public would also make it easier to raise the tax level over time, a point made nicely by McGill University professor Christopher Ragan in a 2008 Montreal Gazette op-ed."

[Lobowolf]

hrothgar, on Nov 12 2008, 07:34 PM, said:

In a shocking move, Jimmy comes out in favor of tax cuts...

Seriously, is there any time that you aren't in favor of tax cuts? This comment is (essentially) meaningless noise.

Yeah, if you can't be inconsistent, at least come down on the right side of the issue!