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In the April 8 issue of
the Wall Street Journal George Schultz and Gary Becker advocated a
massive new carbon tax. Their arguments are based on very poor economic
reasoning and an extremely naïve view of politics and politicians.
Schultz and Becker argue
for a "revenue-neutral" tax on all forms of energy that burn
carbon. "Revenue neutrality" is Washington-speak for the notion
that a change in tax policy should neither increase nor decrease total tax
revenue collected by government. It is a pure fantasy, in other words. No
central planners in world history have ever been so brilliant and so
omniscient as to be able to restructure a major portion of the tax system in
a country of more than 300 million people in a way that produces exactly the
same revenue next year as this year. In reality, "revenue
neutrality" is always just a smokescreen for "tax increase."
Politicians will always "err" on the side of raising taxes despite
all their diversionary lingo.
In advocating heavy new
taxes on energy Schultz and Becker completely ignore the fact that there are
already myriad taxes of all kinds, along with the implicit tax of regulation,
on all aspects of energy production and distribution. There are excise taxes,
corporation income taxes, payroll taxes, and the regulatory prohibitions on
drilling for oil in the outer-continental shelf and in much of Alaska where
there are known to be massive oil reserves. One can just as easily make the
case that the energy industry is over-taxed as under-taxed, as Schultz and
Becker do.
They do make one good recommendation elimination of "subsidies" to energy producers,
but they fail to mention even one example of such subsidies to illustrate
their point. One would hope that they do not refer to tax deductions or
"loopholes" as "subsidies." To do so is to assume that
government owns all of our income and is "subsidizing" us whenever
it does not tax all of it.
Schultz and Becker
advocate the worst possible form of tax collection hiding their new energy tax from the public
by imposing it "at the level of production," which they call
"administratively more efficient" than imposing the tax at the
point of consumption. Hiding the tax in this way will fuel anti-capitalistic
bias even more since the average citizen faced with a higher energy bill will
naturally blame the greedy energy companies instead of the tax-hungry
government. Worse yet, such a tax would be regressive, imposing a
disproportionate burden on lower-income citizens.
It gets worse. Shultz and
Becker also advocate an expansion of the welfare state by paying people on
welfare even more than they are paid now for not working by distributing the
proceeds of their carbon tax as part of the ludicrously mis-named
"Earned Income Tax Credit." Government can play Santa Claus by
sending out such checks to welfare recipients and calling the checks
"your carbon dividend," say Schultz and Becker.
And it gets even worse.
The rate of the new carbon tax should keep increasing forever,
"approximately at the real interest rate," they say. They claim
that this would be only fair by plundering future generations at a similar
rate of plunder being imposed on the current generation (although they do
not, of course, use the perfectly accurate word "plunder" in their
article).
If there is revenue left
over after subsidizing welfare parasites with "carbon dividends,"
Shultz and Becker believe that government should further politicize research
and development with "sustained support for research and development in
the energy area."
George Schultz and Gary
Becker are old lions of the Chicago School of economics. It is mystifying how
that school of thought ever became associated with "free market"
economics.
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