I read an environmental post a moment ago and it got me thinking about some reading I had done on a suggested shift in taxation policy that focused solely on externalities. I was curious, would conservatives or liberals here be on board with taxation solutions that tried to identify true costs of business (for example, the true societal cost of things like smoking, eating McDonald's and poluting a river) in constructing a tax structure that corresponded more appropriately with a behavior and externalities? I know we do this to an extent, but due to lobbying I am sure that companies and consumers pay no where near true costs associated with the production of any given type of consumption. Theoretically however, if a department could succesfully (with minimal corruption) identify true costs and tax appropriately, wouldn't this be a way of effectively targetting the true users and abusers in society? Why do we tax income (taxing something we want to encourage) and not fully tax companies to compensate for damage that they have inflicted on the environment and correspondingly, society (something we want to discourage)? Keep in mind, this would probably mean most companies would pass costs on to consumers. Prices on certain goods such as oil, tobacco, alcohol, fast food, etc would rise considerably. It would also require government regulation, as someone would have to determine the cost of externalities. No need to beat up on me for being the messenger, I'm not sure what I think personally, it's just an idea I've heard floated around and was interested in having a discussion around it.
The issue with such a system would almost certainly be in the definition of externalities, and the calculation of adequate compensation. Moreover, taxes collected from externalities would need to cost more than the externalities themselves... since otherwise it would only be enough to pay for remediation. That's the definition of an externality, yes. And often it has nothing to do with lobbying. Some consequences of production are natural externalities, the cost of which will never be shifted onto the producer without specific action by the government or by local residents. The function of taxes are to raise money for the government. Merely identifying the true costs of externalities and shifting those costs back to the producer would not serve that function. At best such a proposal should be in addition to a proper system of taxation, as a way to pay for remediation costs.
Well, I'm operating on an assumption that some tax payer dollars currently (and in future generations) will have to go to the cost of cleaning up our environment. Effectively, if we were collecting fair compensation, it would minimize the amount of additional dollars that went into dealing with the externalities of business. There could also be some overlap in additional programs that the government operates (ie. food taxes could go towards health care costs). Obviously some core taxes would have to remain to pay for social functions of government, but ideally the taxation of the externalities could lower the income tax. Another factor to consider is that of incentives. If we put a true price tag on all products, consumers would make different decisions. If the price of gas was too high for example, producing alternative energy sources would become a natural market outcome. If fast food was more expensive, consumers would be forced to make different decisions and potential we could see health care costs decrease. An alternate way to look at it would be changing the system so that harmful behaviors are not being subsidized by "public capital" (I think that is the righth term)
Sin taxes are widely used, but mostly at the state level. I don't have exact figures, but it is obvious that the high cost of a pack of smokes is almost entirely taxes. Most states also tax alcohol, lotto is taxation as well. I wouldn't be surprised if there are already federal taxes on these as well. Fast food would be a decent one, but really it would just be "taking back" the money we already indirectly give them by subsidizing sugar and corn for HFCS. http://www.ecoliteracy.org/essays/we-are-what-we-eat
We're chronically, severely undertaxed as it stands. A tax on externalities to pay for remediation of the same would make sense, but not as a primary source of income for the government.
It's a great idea in principle. The problem is that calculating the dollar value of the actual negative effect of any given activity is impossible. Who's "we"? Somalia?
The citizens of the United States. We're taxed at criminally low rates--historically low rates, over the last century. Even despite huge deficits, we continue to keep taxes artificially low. Taxes under Obama are lower than they were under Bush.
15-19% is not "criminally low". Actually, there's no such thing as criminally low taxation - only criminally high spending, which administrations from FDR onward have embraced with reckless abandon.
