Taxation and the middle class

[ijmorlan]

Here's another novel idea, not adding and increasing taxes on society. This is a discussion for a completely different forum I know, but whenever I hear the answer to a MAJOR global crisis is just to tax - and hurt - the middle class even more (segment which pays the biggest proportion of their money in tax as it stands), I shake my head. We can do better than that.

The whole point of Pigou taxes, like the carbon tax, is to internalize externalities. By using the money to fund a per capita grant of cash, in effect it becomes a requirement that people who incur an externality pay everyone for the privilege. If I am going to pollute your air, I have to pay you. Of course, I don’t pay you, individually; I pay a certain amount, it is split up among everybody, and combined with the certain amounts being paid by everybody else. It is obviously incorrect to assert that the carbon tax hurts the middle class.

Without a carbon tax, everybody pays for carbon usage, regardless of how much they emit. With a carbon tax, one has the option of paying less by using less. A person using a roughly average amount of carbon is in the same financial situation with or without the tax.

The poorer the person, and therefore the less gasoline etc. they are likely to be able to afford, the less they pay in tax; but they still get the same cash grant so they come out ahead. Note that this is way better than rations and other clumsy mechanisms because it leaves the choice of exactly how much to consume in the hands of the individual.