The Net-Zero Carbon Tax

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Rep. Bob Inglis and tax cut guru Arthur Laffer must be reading the Standard — their call for a carbon tax offset by reductions “in income or payroll taxes” dovetails nicely with our cover story this week. It’s an idea worth considering, especially if the offset is a reduction in the regressive and burdensome payroll tax.

Two points. First, Krauthammer, Inglis, and Laffer advocate exactly the sort of taxation economists say is the most optimal. They want to decrease taxation on goods our society ought to favor, like work, and increase taxation on goods our society doesn’t like, namely, carbon. Say the revenue from the new consumption tax on carbon went directly into Social Security. This would broaden the tax base for America’s most popular entitlement program, which relies solely on the payroll tax for revenue at the moment (and faces a dwindling number of workers paying into the system). It would add some life to the program, in other words. It would be a de facto Social Security reform — though only one of many necessary to secure the program’s future.

Second, you hear a lot these days about how conservatives need new ideas. And what do you know? The new ideas are all over the place! Meanwhile, what are liberals calling for? Let’s see … universal health care, deficit spending to fight recession, subsidies for alternative fuels, and income tax hikes in the near future. Hmm. As Robert Samuelson points out today, the past year has upended a lot of our expectations about how the economy, government, and society ought to behave. But one thing’s for sure. It’s still hard to argue that the Democrats are the party of new ideas.