Feed on

Well, among the many reasons that I no longer favor it is that I’ve started to realize I live in big boy world, and not the fantasy world of good economics I thought about when I first became a professor:

Schuerhoff, Marianne, David Zetland and Hans-Peter Weikard (2013). “The life and death of the Dutch groundwater tax” Water Policy 15(6):1064-1077. [pdf]

Abstract: We examine the Dutch national groundwater tax (GWT) — a “win-win-win green tax” that promised to simultaneously provide revenue to government, reduce the relative burden of other taxes on productive behaviour (e.g., income tax), and improve environmental outcomes. We find that the GWT generated revenue without having a noticeable impact on production incentives or environmental health. Although the GWT is often cited as an example of environmental economics in action, it was neither designed, implemented nor operated in accordance with environmental goals. In many ways, the GWT was just another source of revenue — and one that bothered special interests. The Dutch government revoked the “inefficient” GWT on December 31 2011

At least to the credit of the Dutch, they scrapped the thing. I’ll give _____ to anyone who can convince me we’d have the same sense to do that here …

3 Responses to “Why I No Longer Favor a Carbon Tax”

  1. Harry says:

    Glad you have been converted. But then you have been converted since before I learned of TUW.

    Ask Steve whether this is a new paradox.

  2. Harry says:

    BTW, I own my well and pay to pump it; but you, WC, have often remarked about public water being a free good. I am sure I use these terms too loosely, but perhaps you might discuss this subject further, maybe in February, when you have the time. There has to be your own Coasean idea to bend our minds around.

  3. Alex A. says:

    1.) The gasoline excise tax in the US is well-structured, but it was never indexed to inflation and real revenues have shriveled compared to an indexed baseline. What does that suggest about the existing political incentives surrounding fossil fuel taxes in the US? Broad-based carbon fuel excise taxes are possible but if anything we will have trouble making them large enough.

    2.) Public choice problems are a real concern, but like Friedman, one should continue to support policies that move in a marginally better direction while opposing attempts to implement versions of them that are not better than the status quo. E.g. Friedman opposed Nixon’s FAP, but liked the earned income tax credit. He didn’t support a worse-than-status-quo change like the FAP, but yet he didn’t let the best become the enemy of the better when it came to the EITC. We should do the same. Support a carbon tax, oppose Waxman-Markey’s frankenstein carbon bill.

Leave a Reply