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Green Taxes


Karl Williams: Land Value Taxation: The Overlooked But Vital Eco-Tax

Land value taxation (LVT) has often been omitted from the lists of natural resources for which eco-taxes are being advocated. LVT provides strong financial encouragement for land to be put to its optimal use and will eliminate speculation on land, as occupants must pay the full LVT whether the land is being fully utilised or not. This leads to better land management, a reduction in urban sprawl, less urban smothering of agricultural land, and less farmland being pushed into hinterland.

LVT makes the investment in resource-efficient infrastructure affordable because the resulting enhanced land values are "recycled" back into public coffers. One particular application of LVT to agricultural land provides much-needed financial incentives for organic farming. Unlike other ecotaxes which "sow the seeds of their own revenue demise," LVT actually increases over time as our environment is enhanced and is thus a stable revenue base.

This paper argues that the LVT assessment process shifts and refines our focus from monitoring human activity onto our use and abuse of natural resources, as any responsible form of stewardship should. It suggests that only if land users are prepared to pay the full cost of utilising resources should private resource holding be permitted.
"The depletion of natural resources and the despoliation of nature is due to a single reason: the failure properly to measure the rental value of all of nature's resources, and to make the users pay the community for the benefits they receive." F. Harrison, "The Corruption of Economics" read the entire article

Peter Barnes: Capitalism 3.0 — Chapter 3: The Limits of Government (pages 33-48)

Let’s set aside for a moment the question of whether government is inherently biased toward property and focus instead on a purely mechanical question: is taxation a good tool for preserving gifts of nature? I pose this question because economists have advocated “green taxes” for over eighty years, and it’s time to move beyond this hoary panacea.

The idea of using taxes to protect nature dates back to 1920, when Cambridge University’s top economist, Arthur Pigou, proposed it. At first blush the idea makes sense. If pollution is free, there’ll be lots of it. If it’s taxed, there’ll be less. Taxation forces polluters to internalize some of the costs they’d otherwise externalize.

So far, so good. The devil, however, is in the details. For example, who sets the taxes? What algorithm do they use? How quickly can they act? To whom are they accountable? And where does the money go?

When the federal government sets taxes, the key players are the House Ways and Means Committee and the Senate Finance Committee. As any observer of Congress will tell you, the process of writing tax laws is ugly, contentious, and time-consuming. Bills are introduced, hearings held, politics unleashed. More than anything else, this is what keeps Washington’s lobbyists on their cell phones.

What algorithm drives committee members when they write tax laws? Most often, it’s what’s best for their reelection. They’re not economists, they’re politicians. They want to please donors and voters. Protecting nature, or future generations, isn’t foremost in their minds. Hence, pollution taxes will never be as high as they need to be.

Consider a real example here — carbon taxes. A tax on carbon emissions could, in theory, reduce global warming. But in order to make a difference, the tax would have to get extremely high. This means Congress would have to raise the prices of gasoline, natural gas, and electricity year after year, hitting every business and consumer in the pocketbook. That’s an improbable scenario.

In most situations, mainstream economists would shout, “Politicians shouldn’t set prices, markets should!” Prices should announce to the world, on any given day, what buyers are willing to pay and sellers are willing to accept. To the extent that government distorts or delays this process, it leads to inefficient allocation of scarce resources, not the least of which is Congress’s own time.

So why did Pigou and his followers give the price-setting job to politicians? Because, in their minds, there was no alternative. Someone had to set prices for pollution, and they thought no one else could do it. But there are other options. ... read the whole chapter


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Wealth and Want
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