Another look at the carbon tax

Today in The Age business section I have an op-ed arguing in favour of a revenue-neutral carbon tax.

This issue has sparked debate among Australian libertarians. One group has insisted that the government should do nothing and we should not even talk about the different sorts of bad policy that politicians might introduce. The other group recognises that the government is going to do something about the perceived problems of climate change and want offer a “less bad” way forward.

My “first principle” position on tax is that there should be no tax. However, when I put on my pragmatic hat I do get involved in tax debates — about the relative merits of income v consumption tax, flat tax v progressive tax, high v low tax free threshold, efficient v inefficient taxes, and the relative merits of different taxes.

Some radicals criticise the pragmatic approach as “selling out”. Some pragmatists criticise the radical approach as wacky or irrelevant. I think both are important.

It’s necessary to know where you want to go and have a dream about the political system we want to see. My dream is anarchy, though anything close to that would be good too. But it is also necessary to recognise the realities of the current system and offer realistic solutions to the issues of the day.

With education I would prefer no government involvement. However, given the current political situation I argue for vouchers. Likewise, with climate change I would prefer no government involvement. However, given the current political situation I argue for a revenue-neutral carbon tax. In both situations, the pragmatic option is better than the current mess. We should not let the perfect become the enemy of the good.

26 thoughts on “Another look at the carbon tax

  1. The Age article is good.

    I presume that the transport sectors annual CO2-e emissions should have been stated as 94 million tonnes and not merely 94 tonnes.

    In terms of idealism versus pragmatism I agree that we need both.

  2. One group has insisted that the government should do nothing and we should not even talk about the different sorts of bad policy that politicians might introduce.

    I don’t know any group that has suggested a head-in-the-sand approach, except for in the non-existent caricature that you keep portraying of those who dare to disagree with you.

    Some radicals criticise the pragmatic approach as “selling out”. Some pragmatists criticise the radical approach as wacky or irrelevant. I think both are important.

    And some have different ideas on what really is the most pragmatic approach.

    With education I would prefer no government involvement. However, given the current political situation I argue for vouchers. Likewise, with climate change I would prefer no government involvement. However, given the current political situation I argue for a revenue-neutral carbon tax.

    One is a compromise which I believe the public would be willing to accept. The other would destroy your reputation, as the GST did with the Democrats.

    Support for a revenue neutral carbon tax makes sense if you are wearing your CIS hat, since this appeals more directly to government. Wearing your LDP hat, it does not, since this needs to appeal to the public (and you don’t do that by supporting a new tax, even if it does reduce total burden).

    I realise of course that this forum is neither of those organisations, but since it’s a libertarian society blog, I would think it’s the ideal place to push – in your parlance – the “radical” agenda.

  3. Fleeced — I am no longer on the executive of the LDP. I am now simply a dealer of ideas.

    And I think it is possible to talk both about the radical and the pragmatic approaches to policy. At the moment, my greater interest with the climate change policy debate is to try and convince people to not support a trading system.

  4. 1. 31,000 scientists have come out against the global warming agenda.

    2. Even if the Earth was warming, it would probably be good for humanity and life in general. Humanity has gone through its biggest periods of growth during warming periods. Just imagine if Siberia were to be able to grow food crops. Some say the Sahara would become moist and tropical again. The Ice Ages, by contrast, were marked by slower biological growth.

  5. You are truly named, Mad Dog.

    A good article, John. Well done. Though you must be able to write things like that in your sleep nowadays, having done so much on a carbon tax before!

    I’m not sure if you saw my explanation in the comments section, but when I tried to give a libertarian defence of a carbon tax at my blog, I linked straight to your CIS monograph, so contrary to your sad emoticon, you definitely got a mention 😉

  6. Mad Dog — I’m aware of the state of the debate. But irrespective of the science, government action is inevitable. Indeed, it started 10 years ago and has been getting steadily worse ever since. This is the political reality that we have to deal with today.

    As for the science, I am from the Lomborg/Michaels school of skepticism. That position is to accept the basics of the science, but to reject the exagerations and fear-mongering and recognise that most government “solutions” will probably be worse than the disease. I base my opinion not on a vote, but on my understanding of the science… which is above average for a non-scientist.

    I don’t want this thread to turn into an AGW science debate. As far as I can see, the science itself has very little to do with comparative political philosophies and I am suprised to the extent that some people want to link their politics to a scientific position.

  7. With every piece of “pragmatism”, you give up a little and a little more after that, and after that you are again pragmatic, until you loose everything. I’m sorry, but “pragmatism” is the coward’s way.

  8. What exactly is so horrible about replacing a part of the evil progressive income tax, which was part of the wishlist in the Communist Manifesto, with what is essentially a narrowly-based tax on some forms of consumption?

  9. The beauty of idealism is that you can spend your entire life being a critic and never actually be a part of building or reforming anything. Why reform taxation when taxation is evil. Why participate in reform of anything when government itself is wrong. It seems to me that the idealist who can never be pragmatic or even see the good in somebody elses pragmatic reform is close to worthless.

  10. If faced with two undesirable alternatives, there is a natural tendency to choose the one that that is least offensive. On that basis the carbon tax wins.

    If you consider the CPRS with carbon trading will become massively unworkable and ultimately implode, arguably it’s better to stick with it.

    Depends on your time horizon I guess. Another 10 years of declining temperatures and the whole AGW industry could be looking for new employment.

  11. DavidL – I understand your logic but I don’t ultimately think that such a course would be fruitful. It may be the right strategy for the LDP to adopt (in fact I think it is) however I think the opposition parties on aggregate (ie the Liberal/National coalition) should be putting forward a carbon tax as a policy alternative. Who wants to waste 10 years? And I think perhaps you miscalculate the impact that rent seekers will have once the ETS is established.

    In political terms a carbon tax will let the liberals out green the lefties. It simply works. And those that don’t like will have little alternative (except perhaps to roll the leader that proposes it).

  12. @TerjeP:
    About “idealists” and “pragmatics”: just look at the history of progressive tax. This is not about those two words, is about being right or wrong. And you are wrong. There is no middle way, and even if you think there is, it is just an illusion, it is still the wrong way, you are just walking it slowly.

  13. Orefeu – we have had idealist for over half a century wishing there was no income tax. And yet pragmatists such as Hawke, Kennedy, Reagan and Thatcher actually did something during this time. No they didn’t abolish income tax but they did offer us significant reductions. Given the accomplishments of pragmatists versus idealists during this time I’m thinking the pragmatists have delivered far more than the idealists. Of course I don’t mind idealists who can be pragmatic when opportunity knocks but I have little time for puritians that do nothing but pontificate or who are waiting for opportunities that might not show up until near the end of time. Idealism tells us where we want to be, pragmatism gets us there. I’d rather the pragmatist who is a bit hazey on the details of the destination over an idealist that can’t be bothered with taking one step at a time.

  14. Orfeu — I assume you’re equally opposed to suggestions that we should replace government schools with vouchers, or replace the progressive income tax with a low flat tax, or that we should legalise marijuana first, etc.

    I disagree. I think it’s a good thing to argue for reform in the right direction… even if you’re not going to get everything you want straight away.

    I think there is a place for radical libertarian ideas. And there is a place for moderates and pragmatists to engage with the mainstream and try to turn the debate towards more libertarian thinking.

    I’m not sure that a trading system will nautrally disappear. One of the reasons that interventionists prefer a trading system to a tax is that they assume (correctly in my view) that a trading system will be harder to remove later.

  15. It is only about this tax and I’m against it 100% and I don’t see any middle way about it. In rest I have mixed opinions, I’m not for legalizing marijuana, although I wouldn’t mind, but I also don’t think that people should spend years in prison for consuming it.

    I just think that there are places where concessions are just as harmful as giving up all together.

    I’ve also read TerjeP recently and he seams very convinced about this middle way. At one point you have to make a stand and say enough is enough and he will never say that. In fact he will say that, and then make a compromise.

    PS: I’m in country that just kept on making compromises, and we are again in big s…, after the 90′, when we were about to starve to death, until the government just collapsed and, in that little period of anarchy, somehow people caught a break and recovered.
    Also those examples are not very good. Thatcher, Regan did more than tax cuts and don’t forget the monetary measures from the beginning of the ’80. And those were tax cuts, not a new tax that requires a compromise in order to fit in the liberal mindset.

  16. So if we wait until the ETS is implemented. And then argue for a tax instead of a trading scheme we’re doing the liberal thing (because it’s an improvement). But to pre-empt the trading scheme is bad, because it’s suggesting another tax…

    I get it, we’re only allowed to propose more liberal ideas if the bad government scheme is already implemented. Suggesting the ideas before the government has fucked us over is not liberal.

  17. Orfeu – you may be right that AGW is another socialist-inspired anti-progress scam. It probably is. But it might not be. How can you be so sure?

    And don’t be so cynical about pragmatists. WIthout compromise, nothing ever happens. Look at the internal factions inside the only libertarian party in Australia. If everyone insisted on a no-compromise approach, nothing would ever happen.

    Jack Welch, one of the most successful CEOs in recent history, says that a successful business runs not on grand ideas but on the effective implementation of small ideas. There’s a key difference.

  18. “Mad Dog — I’m aware of the state of the debate. But irrespective of the science, government action is inevitable. Indeed, it started 10 years ago and has been getting steadily worse ever since. This is the political reality that we have to deal with today.” – John Humphreys

    Then you deal with it like a man and speak out against it. Don’t cower down like John McCain and become some ‘moderate’. He used to be a hardcore conservative, but after so many compromises, he was effectively a democrat. Besides, no one takes you seriously when you support ideas that you do not actually believe in. They can tell.

    I also thought I saw on this blog that 64% of the population of Austrailia was against the carbon tax. The opponents of this silliness can use this to their advantage. They can even use populist rhetoric, based on this number.

    “You are truly named, Mad Dog.” – Jarrah

    I can back up my claims.

    31,000 scientists go against claims of IPCC – http://tinyurl.com/cnlhde

    Global Warming (oh, excuse me, ‘climate change’) may be good for planet –
    http://www.timesonline.co.uk/tol/news/world/us_and_americas/article2500311.ece
    http://www.globalwarming.org/node/247

  19. Mad dog — just because I’m aware of the state of the debate, that doesn’t mean I agree with you. I think that on the balance of information I have at the moment, it is likely that we are facing some man-made climate change… and that this may have negative consequences for some people/countries.

    But I don’t want to get distracted on the science debate here. Irrespective of the science, political action is inevitable. It is reasonable to look at the various options and consider which is the best/worst.

  20. The way I look at it is if you really feel that you have to negotiate with these people, you let them demand the undesirable things, while you can argue for exactly what you want or even more. For example, if a landlord wanted you to rent his apartment for $2000 per month, but you only wanted to pay $1500, you can start your bid at say, $1000. After awhile, the two then come to an agreement somewhere in the middle. That sort of thing.

  21. Mad dog — I think you are significantly over-estimating the bargaining strength of your side of the argument. Both sides of government agree that they should waste billions of dollars. They are now in a bidding war for who can waste more.

  22. What John said. Essentially libertarians have no political bargaining power. Their only chance in Australia is to sway the middle with logic and reason towards a less bad option. And even that is a very tall order.

    Orefeu – the ban on marijuana is a far greater impost on liberty than a carbon tax would be. Somewhat ironically you seem to pick and choose liberties with a quite high degree of pragmatism rather than principle.

  23. Well, in the USA, as recently as a couple of years ago, the libertarians had no voice either. But then a certain someone showed up and changed everything. Now the libertarians are far more into popular society than ever before. Everyone tried to marginalize him, including the ‘responsible’ beltway libertarians. But it was all in vain for them.

    He got through to the people, not the establishment and that is what mattered.

  24. Mad Dog – Ron Paul has been in congress since the 1970s (with a break). He did not just suddenly show up. And the federal government in the USA is much smaller relative to other layers of government than the Australian federal government (even though overall aussies have a fractionally lower tax burden). As such abolishing US federal income tax is actually reasonably pragmatic as is the notion of respecting the constitution. Whilst his position is pragmatic it isn’t politically conventional.

  25. Yes, I am aware of his tenure. I did not mean to imply that he simply showed up. All I am saying is that he went from just another congressman to someone who gave the other Republicans running for president a good, someone who was the talk on a variety of college campuses all over, someone who raised millions of dollars, someone who regularly shows up on various tv shows, etc.

    In addition to merely opposing the income tax and the federal reserve, he supports the total legalization of all drugs, the complete withdrawal of all american soldiers from all over the world, withdrawal from the United Nations, withdrawal from NATO, the end of all corporate welfare, plus a long list of other positions that are anything but mainstream.

    He even said that Abraham Lincoln should not have had the Civil War. That may not seem like a big deal to you, but in my country, that is the equivalent of blasphemy. You should have heard the abuse that he got on virtually every major network and cable news tv show. You should have taken a look at the desperate liberal and conservative smear merchants try every diabolical and vicious tactic possible on him. There was even a pathetic campaign to smear him as a racist.

    The point is that I do not feel that the libertarians have to compromise on their message, regardless of how different from they mainstream they are. I argue that it is usually the more strident people in any given political faction who push it forward. 20 years ago, no one heard of the greens. Now they are a few short steps away from being a mainstream political faction. Did they offer watered down planks? Did they act all polite and wait their turn? Or did they attack every opponent (or perceived opponent) of their views?

    Same thing with the Conservatives and Thatcher in England. They seemed pretty charismatic to me. Or Reagan and the Republicans in the USA. Or how about all the worst factions of the 20th century? Communists, NAZIs, Fascists, etc. I don’t recall any of them being moderate, yet they managed to get their ways quickly, despite starting from nothing.

  26. The Greens have watered down their policies significantly from what many of them want. And Thatcher & Reagan only ever offered a very watered down version of freedom.

    I think libertarians should offer something a bit more radical than the Greens/Thatcher/Reagan.

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