I believe that taxes can assist the transformation to the economy and society that we need if we are to avoid catastrophic environmental change. That is why I have been writing about what I am calling Tax to Save the Environment (TASTE). I stress, I do not think tax is the only way to achieve this: regulation will usually be required as well, but tax has powerful signalling capacity both economically and socially, and I think that is vital at present. I do therefore offer another suggested tax now.
In 2015 I suggest a Carbon Usage Tax (or CUT) in my book The Joy of Tax. I explained this in my White Paper on Scottish Taxation for Common Weal in 2017 as follows:
A Carbon Usage Tax
- The UK's indirect taxes (VAT and excise duties) plus its system of specific tax charges (BBC licence fee, road fund licences, etc.) are regressive in their impact. The UK needs a progressive indirect tax to rebalance the tax system in addition to the changes already noted under direct taxation. The Carbon Usage Tax (CUT) is intended to achieve that goal and to eventually replace national insurance charges.
- The CUT will be charged on the flow of funds through a person's bank account. The charge will be levied by the bank and will be progressive. For large numbers of people the rate will be set at zero per cent and it is expected that this will remain true even when the CUT replaces national insurance. The rate will, however, be progressive and be applied to all flows into and out of accounts excluding those that are transfers between accounts a person has (e.g. their loan, savings, current and mortgage accounts, including in different banks). Initially charged monthly the CUT would be adjusted to an annual charge at each year-end.
- Resident people who do not appear to have a bank account for CUT purposes or who cannot explain their low rate of bank account usage will be assessed to the tax based on their income.
- The tax is intended to tax higher levels of consumption, as indicated by higher levels of spending, at higher rates. It is intended to reduce that consumption as a result and act as a green tax as well as an eventual replacement for national insurance that discourages job creation, when what should be discouraged is excessive use of the world's resources.
This is, of course, a financial transaction tax. The aim of it would be simple, and fourfold:
- It would capture non-consumption expenditure, which is very largely not liable to VAT and other indirect taxes at present;
- It would discourage excessive consumption by taxing it more highly;
- It would reduce the rate of tax on work by removing NIC over time;
- It would be hard to avoid: using offshore bank accounts would lead to an assessed sum at a penal rate unless voluntary disclosure of flows was made.
The idea will not be popular, most especially with those who are well off. But they are the people most engaged in burning the planet. I believe its time has come.
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I’m all for you tax suggestions but I would also like to see people paid better for what they do – low waged people do not make happy tax payers either.
As I said, revenues from these taxes have to be redistributed
Would you let people consolidate their CUT on a per-household basis, so that bigger households could consume more before being penalised?
The reason I ask is that parents will consume a lot more in the process of buying the things they need for their children.
I think that’s reasonable
Let me also be clear that I would intend this to have little impact on lower income households
All I’m basing my observations on Richard is the unpopularity of tax in our society – an irrational unpopularity but one that exists and for which there is nearly an unfortunate knee-jerk reaction.
So approaching tax on that basis always needs in my view to be done carefully (given the furiously impressive pace of ideas you have come up with over Easter).
I suggest that there maybe other ways in the spirit of a ‘courageous state’ which may also help.
http://blog.spicker.uk/this-blog-entry-is-suspiciously-green/
“This is, of course, a financial transaction tax” then why call it a carbon Usage Tax? (I’m not trying to be pedantic).
I’m in favour of a carbon allowance, per head. Non-tradeable. That would focus minds – but would probably be a political non-starter since the UK middle & upper classes would no longer be able to take several foreign holidays per year (& for the sake of clarity – I could afford a foreign holiday every month – but prefer to go for a ride on my bike instead – strange but true). One thing for sure, we cannot go on as we have been doing, & perhaps a financial transaction tax/carbon usage tax is a start. How then to escalate?
Why call it a carbon usage tax? Because that is where the impact will, I hope be
But I agree, as with all these suggestions: they are starting points
However, given transition is necessary and politically unavoidable I think they have merit
But its nothing to do with carbon emissions is it? Emissions per pound spent vary hugely. That’s even true for single products – the emissions per kg beef vary by a factor of at least 4 depending on breed, feed, etc.
We need a real carbon tax to discourage beef consumption much more then chicken consumption and chicken more than beans. There are also big variations between the carbon intensity of many. probably most products, including tons of steel, kWh of electricity and flowers (depending on whether they are home-grown or flown in by air) so we need a carbon tax to incentivise people to switch to lower carbon options.
The CUT does not meet this need. It’s not what we need to mitigate climate change.
Ok, do better then.
Progressively
A better option would be a carbon tax with dividend (Green Party policy). The tax would be charged on all goods and services including imports. High spenders would obviously pay more tax than low spenders. The dividend would be paid at a flat rate person so that many poor people would be net beneficiaries of the system. (We’d probably combine it with the Citizens Income.) Most and probably all better off people would be net contributors. That’s progressive enough for me and I think that making it more progressive would, except for air travel, be quite hard.
It’s not necessary that all the carbon tax be paid as dividends provided that enough is paid to protect the poorest. The rest can be used to fund the just transition to a sustainable society.
The hard part of this scheme is assessing the carbon intensity of a million products and I think some approximation will be needed at first. And, obviously, a green government would prioritise the products with the highest carbon emissions.
That will not be enough now
I am slightly confused …
“The tax is intended to tax higher levels of consumption, …”
followed by …
“It would capture non-consumption expenditure, …”
Surely if you want to tax consumption you aim to capture consumption expenditure?