# Simple argument part 2

part 1 is here. The carbon tax would work in practice when it comes to gasoline as follows:

Let’s say that without any taxes the cost of one gallon of gasoline at the pump would be \$3.  The government levies a \$5 a gallon tax.  The new price at the pump is \$8 (actually it would be slightly less but let’s assume that there’s no adjustment by retailer). Let’s assume further that there are 100 million Americans (I know there are more) and that each month the total number of gallons that these 100 million Americans consume is 1 billion or 10 per person (I know it’s more).

Now, let’s divide the 100 million Americans into a rich half and a poor half. The rich half burns a little more gasoline on average – they drive Mercedes and Hummers – let’s say. The poor burn a little less. They walk more. They car pool. They drive Camrys and Ford Focuses (Focii?). The live in smaller houses and heat and cool them less. So each rich person on average burns 11 gallons per month and each poor person burns 9.

Doing the math we find that the total amount collected in taxes is \$5 per gallon per month or \$5 billion. Now we divide the \$5 billion by the total number of Americans to come up with \$50 returned to each American which is the amount that each on average purchased. But because the rich consume a little more, each has paid \$55 per month so on average the wealthier half is out \$5 a month.

On the other hand the poorer half burns on average 9 gallons per month and therefore pays \$45. Since each individual gets \$50 back, poorer Americans are on average better off monthly by \$5.

People will do everything to avoid buying the newly expensive gasoline such as car-pooling, taking public transportation, walking and bicycling, and moving closer to work.  Auto manufacturers will market more efficient vehicles and alternative modes of transportation will spring up as entrepreneurs try to take advantage of people’s additional disposable income (so long as they cut back on gas consumption).

Disclaimer – obviously, I used the roundest of figures and ignored corporate purchases of energy.  But factoring them in would actually strengthen the conclusion that a carbon tax will improve the quality of life for the poor and middle-class in the aggregate.  This is the case so long as the revenues are returned on an equal basis to each of us. I will return to this subject soon and address the complicating factors alluded to in this paragraph.  Part 3 is here.

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### 11 Responses to Simple argument part 2

1. jeff linder says:

OK Hal,
Let’s say your plan is implemented. What makes you think your plan won’t change behavior? The rich have more options than the poor. They will find ways to avoid the tax. So your big income transfer scheme becomes less and less efficient with time. Then there is the overhead. You have to pay for the implementation of the program and that cost, as we all know from government bureaucracies will rise with time. Give it up. As with all your schemes…its just a way to disguise your greed and envy with false compassion.

2. halginsberg says:

Thanks Jeff. The answers to your questions may form part of a future post but real quick: 1) avoiding the tax would be well-nigh impossible. When it comes to the gas tax, it would be assessed on the pump, just as it is now. Nobody doesn’t pay the very low taxes on gasoline today. I don’t see how anybody could avoid paying that. Coal, natural gas, and oil would likewise be taxed at the point of final sale. E.g., coal-generated electricity, natural gas and oil on the invoices that most of us pay online every month. I don’t see how anybody could avoid paying these taxes. There would be virtually no additional overhead costs. Gasoline is already taxed. The other fuels would be taxed online just as Amazon now taxes items online. Yes, the government would have to send rebate checks every month but the IRS seems not to have much trouble sending out letters. Plus, most rebates would simply be paid by direct-deposit.

P.S. – For a second there, I thought you were turning over a new leaf and were prepared to engage in a good-faith dialogue about the very serious problems we face. Then I read your last sentence.

3. jeff linder says:

A few simple gas tax avoidance mechanisms.
Work from Home
Hybrid vehicles
Geothermal

And will the “poor” be able to afford gas at a huge markup when the check is “in the mail”? What happens when there is a tiny glitch in the system? How are people living paycheck to paycheck going to come up with the cash to pay for energy?

wrt the last sentence. Every solution you have is government based that is funded by someone other than you. My statement stands.

• halginsberg says:

The solution is government-based because there is no other way to factor into fossil fuel energy prices the true cost that fossil fuel burners impose on all of us. Quite simply, global warming demonstrates the limits of “market-pricing mechanisms”. That’s why righties have to deny its existence. If righties acknowledged that unrestrained unregulated human activities were destroying the foundation of our existence, they would have to reject their ideology.

You raise legitimate logistical objections. The obvious solution: payments are made on the first of the month but the tax increase doesn’t kick in until the 5th.

• Jeff Linder says:

You focus only on the negative of fossil fuels Hal. What about the positives? And you didn’t address the effects of tax avoidance.

Hal- I have wanted to respond but haven’t had time. However, the two of you now have gotten to a point that I absolutely wanted to challenge Hal you on, so I’ll do this quick. Yes, you could pre-load gas-tax rebates at the beginning of the month, but that solves nothing. You obviously have had little contact with members of the working-poor. The poor are chronically poor at the end of the month – they have more priorities on which to spend money than they have money for. Giving them an extra \$50 at the beginning of the month does nothing. As Jeff says, they won’t have money at the end of the month for your inflated gasoline prices.

Also, not all working poor use less gas. It is more accurate to state that the poor buy less discretionary gas. Many use MORE gas, or as Jeff implies, they will end up using more gas (than the wealthy) after your tax is enacted. This is because the working-poor drive older cars (they can’t afford a dedicated commute Prius & the car they chose must haul the family), they work multiple, varying jobs at widely-spaced distances, & odd hours (making car-pooling & public transportation difficult), they can’t afford to live near where they work (they remain living near family for the other supports family provides such as babysitting, etc). What your Draconian tax does is make it harder for such poor workers to survive – many would end up losing employment opportunities & thus opportunities to better themselves & their families. All of these are unintended consequences & reasons for the gas tax to be SLOWLY phased in. I’ll try to post more later but I’m spitting nails now & have to go…

• halginsberg says:

What’s a slow phase-in? How about \$1 a gallon today with an additional \$1 tacked on every 8 months? I could live with that. Gasoline prices have recently dropped by over \$1/gallon. You’re right that many poor people consume more than the mean amount of gasoline. To me that’s not a good enough reason not to employ this solution. Instead, we may need to increase the availability of public assistance in those areas where people have fewer options to reduce gasoline consumption. Another, perhaps better, option is to provide slightly larger rebates in open spaces states like North Dakota and Texas and slightly smaller rebates in Northeastern states where people drive fewer miles per capita like Rhode Island and Delaware.

I am disappointed (but not surprised) that you are so dismissive of people that would be bankrupted by paying what you now must admit would often be a regressive gasoline tax. I guess it is that you have trouble feeling much in common with “those people”, i.e. people that can’t afford to live near where the family bread-winner works and people who can’t afford a Prius as a dedicated commute car. Your wealth insulates you from such problems, and if necessary, you are willing to pay a bit more for your fuel. You know that regardless of the amount carbon fuels are taxed, it is doubtful that your lifestyle would be much affected in any meaningful way.

On the other hand, many in the working class burn 20 gallons a week (or more) for quite legitimate reasons. One you might understand is to ensure that their children receive good childcare & a good education in safe schools (in my previous post I listed many others). To “those people”, your tax could mean paying an extra \$400/mo or more and only getting a \$50 rebate. While I recognize that you were using only hypothetical numbers (and so am I), it serves to illustrate that what for years you alleged would be a Progressive gasoline tax, would in fact often be quite regressive. This is so typical of bleeding-heart Limousine Liberal types that constantly proclaim themselves as holier than thou and that claim to know so much than “the common people” on so many issues.

My counter proposal would be to establish up to a \$1/gallon tax now, and to peg future increases/decreases to the relative price of gas and to the health of the economy. While it is a smaller tax than you suggest, it would raise more net money for other things, and it has less potential to be super-regressive to those working-poor that must drive a lot. This plan also has much less expensive bureaucratic overhead, as there would not be the massive rebates (that you are already proposing to further complicate in the name of fairness). I would propose all the tax money collected be used for alternate fuel infrastructure, public transportation, & on projects that reduce fuel usage (like alleviating traffic congestion and road repair). This would be worth at least \$1/gallon to most everyone, both rich & poor – and especially worth money to those who must drive a lot.

Unfortunately, to get such a Carbon-tax passed, we’d likely have to give up existing taxes on corporations and/or the rich in exchange. While that makes the tax less palatable, it might be an acceptable compromise with Republicans because it would allow the camel’s nose under the carbon-tax tent.

• Jeff Linder says:

Hal also assumes that there would be no effect on various commodities/services. How are businesses factored into this mix? They pay the tax on fuel, how do they get a rebate?

5. halginsberg says:

@Shade – can we have this conversation without questioning each other’s motives. @Jeff – your point about companies purchasing energy is a good one and I’ll address it in next comment.