If we want carbon taxes without riots, reduce other taxes
Taxation has been a core issue in some of the major revolutions of history. England’s Charles I needed revenues but only Parliament could authorize taxes. In return, Parliament demanded more powers relative to the monarchy (though they thought they were protecting rights Charles was undermining). Such was a major cause of the English Civil War, (1642-1651) between King and Parliament. I don’t need to tell you the major role taxation played in igniting the American Revolution in the 1770s.
In 1789, the French Revolution broke out. As with the English or American revolutions, the causes for this event were many and complex. Taxation was just one part of it. But it was a part. The French monarchy had spent vast sums fighting England from 1689 onwards. The Seven Years War (1756-1763 – known as the French and Indian War in this country) saw French armies fight – and lose – in India, Africa, North America, and Europe. The French did better when they aided the Americans in the revolutionary wars (1775-1783) against the British, but the French king, Louis XVI, added considerably to his debts in doing so. He attempted to increase taxes to cover these expenses, but the French nobility was largely exempt from taxation. As a result, the burden of the taxes fell on those who were much worse off. In 1789, the French, fed up, rose up. Like Charles I before him, Louis XVI ended up losing his head. George III, who only lost his colonies, got off lightly in comparison.
The French are at it again. As my colleague Isaac Orr has written, increased fuel prices in France – diesel prices have skyrocketed more than 23 percent over the last 12 months – have triggered some of the worst civil unrest since 1968, in a country as noted for its civil unrest as for its food. These price rises have been driven by rising fuel taxes. President Emmanuel Macron says these are needed to reduce France’s dependence on fossil fuels and fund renewable energy investment.
Can taxes save the planet?
There is a notable overlap between people who think that taxes should be raised on carbon based fuels and people who think that taxes should be raised on everything. A cynic might be tempted to think that the promised environmental Armageddon provides a rather handy excuse for a set of policies which these folks would be pushing for some other reason if climate change wasn’t an issue.
Let us not be cynical. Let us assume that these folks are sincere in wanting to use the increased taxation of carbon based fuels to save the planet from doom.
But events in France should give them pause for thought. The riots there illustrate that people’s time preference is not, generally, so low that they will “pay any price, bear any burden, meet any hardship” to save the world from global warming. In short, there is a limit to how much the humans of today will sacrifice to save the humans of tomorrow.
Maybe. But only if we cut other taxes
But there is hope for environmentalists. It is possible for taxes on carbon based fuels to be increased without straining people’s willingness to pay to the point that they burn down the Arc de Triomphe. But we have to reduce other taxes to do so.
This is what environmentalists need to accept if they are sincere about using the increased taxation of carbon based fuels to save the planet from doom. We can try this, but only if other taxes are cut by a similar amount. Raise taxes on carbon based fuels, fine, but cut income taxes, capital gains taxes, corporate income taxes, sales taxes, inheritance taxes to pay for it. If you think a carbon based fuel tax burden of, say, $100 billion a year is needed to save the planet, pass it and reduce income taxes by $100 billion a year.
If environmentalists would embrace this, there would be no room left for cynicism about their motives.
John Phelan is an economist at the Center of the American Experiment.