Weekend reflections

It’s time once again for weekend reflections, which makes space for longer than usual comments on any topic. As always, civilised discussion and no coarse language.

33 thoughts on “Weekend reflections

  1. carbonsink Said @ 24;

    “But surely that is point. We should all be spending a much larger share of our incomes on (fossil) energy”

    Maybe we agree;

    We currently tax the community at 33% of GDP. If we then tax essential(fossil) energy at an additional 10%, bringing the total tax take to 43% of GDP, I doubt it will kerb (fossil) energy use much as it is essential to our standard of living. What will probably happen is that by increasing the tax take we will have a corresponding lowering of our standard of living.

    The only way to decrease the use of fossil energy is to find an alternative that is competitive. That shouldn’t be difficult if (fossil) energy was the only thing taxed at a rate of 33% of GDP. Finding an alternative energy source would be the only tax avoidance scheme going.

  2. That’s essentially my point TonyG that if we straight tax fossil energy there is that maximum upper bound unless we raise the overall level of taxation. OTOH C&T in trying to fix quantity must let go of price and that could easily be blue sky and a virtual tax in the hands of private emission permit holders once auctioned. That’s a clear competitor to communal taxing and something must give under that scenario. Big Govt greens(I’m a market green) may well be shooting themselves in the foot there and curiously enough it looks like Turnbull is on their side with his latest stance, although they probably wouldn’t see it that way. Peas in a pod really except that Turnbull is smart enough to recognise big finance will drive a bus through international ETS.

    When you see clearly the only logical alternative in the face of the GF meltdown of derivatives trading that leaves you to ask should we go for that maximum hypethetical straight fossil taxing. My answer is essentially no and I outline why so and how and why we should be prepared for some sensible tradeoffs. Feel free to pick the bones of it and suggest better flesh.

  3. John, it seems like the Canadians just cannot win for on top of the current financial crisis they now have the H5 avian influenza virus. According to the latest info 60,000 birds at a commercial poultry in southern B.C. had to be put down.

  4. Observa @ 17, I agree that it would be a good idea to use some sort of wealth tax to replace income tax.

    There is an obvious reason why taxing people on the value of what they own is far more economically sound than taxing people on how much they earn. That is because people have more incentive to put capital to its most productive use.

    If I own a block of land, and the government taxes me on the value of the land but not on the income I generate from the land, then I have far more incentive to put the land to its most productive use.

    While taxes on income and business profits almost always act as a disincentive to work, investment and productivity, taxes on passive wealth often enhance economic efficiency.

    Yet in much of the community there is a general view that income taxes are somehow ‘fairer’ than property taxes.

    This just proves the truism that people have a natural bias towards bad economic policy.

    [Monkey’s Uncle is the new username of Nick K]

  5. observa, what you said here about tax swaps is IMHO the way to go.

    ” Essentially they believe in taxing things you want less of (CO2) and tax relief for those things you want more of (income and jobs).[and maybe renewable s]

    Notice that this compromise position negates any need to argue for or against the AGW theory and given the natural disappointment with the Rudd Govt’s opening stance on C&T and its propensity to hand out so many free permits, could well be more satisfactory for both viewpoints, as well as a more level playing field if implemented domestically and internationally.”

    All they need to do is find the correct taxation price point to achieve the desired outcome.

    Monkey’s Uncle said;

    “If I own a block of land, and the government taxes me on the value of the land but not on the income I generate from the land, then I have far more incentive to put the land to its most productive use.”

    We have land at the most productive use in NSW and the land taxes takes 25% of the rental income every year. Land taxes are rent taxes and generally hit low income housing tenants and small tenants in shopping centres the hardest.

  6. Tony, all taxes have some negative impact on the economy or invariably inconvenience some people.

    The problem with state land taxes is that there is no compensating reduction in income tax (as that’s a federal tax). So you can’t really measure the tradeoff of higher property taxes/lower income taxes.

  7. Monkey’s Uncle;

    The cheapest rent for a house around my way is about $500 per week. The land tax component is about $125 per week. If the tenant pays his rent inclusive of its land tax component with after tax income, and he is on the 45% top marginal tax rate, then he would be paying another $56 per week tax on top of the $125 land tax he is already paying.

    That is how I measure “the tradeoff of higher property taxes/lower income taxes.”

  8. “Notice that this compromise position negates any need to argue for or against the AGW theory”

    Exactly and I have been a fan of fossil fuel taxing for a long time before it became fashionable with AGW C&T. It is the very means by which we convert the natural environment to our desires at such a phenomenal rate and further there is the peak oil factor and the need to adapt quickly to that.

    It is essential that overarching ‘price’ comes to all of us via a higher private cost of all resource usage, for truer social costing, rather than any other more obscure mechanism. When it does that we will concentrate on quality and longevity over quantity and disposability as well as increasing the incentive to recycle due to the higher cost of new resource useage. The tax system is fundamental to setting the constitution of our marketplace in that regard. Indeed it is the very means by which we impose social costing and the way in which we do that, has never been more critical now.

    You can immediately see how fossil/resource taxing is administratively simple, unavoidable and indifferent to private, business, religious, etc use as it should be. (ie it is the ultimate level playing field) Furthermore with stamp duties and capital gains tax removed, land and capital are as free to be traded as labour is, which is critical if we are to be fleet of foot in adapting to a greener society. Taxation should be absolutely frictionless in that regard and resource taxing allows for that imperative.

    It’s hard to see any negatives in what I outline and yet we persist with a clearly failing system of pricing, tacking on more and more convoluted and administratively costly quantity controls in the vain hope we can jumpstart its rotten ticker. Feelgood plastic shopping bag economics in a plethora of shopping trolleys full of cheap packaging, Gladwrap, sandwich bags, bin liners, you name it and our tips and landscape are full of it. Would you like a free doggy doo bag with that sir? Err.. bear in mind you can’t put groceries in it on the premises lest the Govt inspector is on the prowl sir. Kindergarten stuff. The price of freedom is not vigilance, it’s just properly constituted price.

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