Pollution taxes

The Herald reports:

Environment researchers have made fresh calls for a tax on polluters on the back of an OECD report highlighting rising pressures on our green backyard.

Through its new book, Vanishing Nature, the Environmental Defence Society has put forward an environmental consumption tax and rebate as a key reform, which it argues has the potential to tackle environmental degradation while broadening and rebalancing New Zealand’s tax base.

The lead author, EDS senior policy analyst Dr Marie Brown, said it would also help to reduce wealth inequality, could be designed to cut growth-limiting income and company taxes, and fund climate change mitigation.

My first reaction to any proposed new tax, is I’ll consider its merits if it is proposed not to increase the overall level of taxation, but as an alternative revenue source, which would allow income and company taxes to be reduced. It is good to see that this is the case here, even though they seem to be suggesting only a partial offset.

Dr Eric Crampton, head of research at the New Zealand Institute, said that in principle, taxes on pollution were far better than taxes on income so long as they were set properly – but this was very hard to do.

Simplicity is important – as we have with GST.

Taxes tend to reduce whatever you tax. So if you tax income, you reduce labour. If you have a GST you reduce consumption. If you have a CGT, you reduce capital. So a pollution tax can reduce pollution.