How feasible is a guaranteed minimum income (crosspost from CT)

We were talking at CT not long ago about universal basic income policy, and there were a variety of opinions about the desirability, political sustainability and implications of such a policy. But, before arguing about those issues, it’s useful to consider whether a basic income is feasible at all and, if so, what kinds of tax policies, and adjustments to other welfare policies, would be required to support it. I’ve considered the relatively easy case of a guaranteed minimum income, rather than a universal basic income paid to everyone, as advocated by Philippe von Parijs and others.

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Spoke too soon

Having just given a relatively optimistic view of US policy on climate change, I’ve seen a string of signals that the Obama Administration is set to sell out on this vital issue, presumably on the advice of the same political experts who persuaded him to ignore the unemployment problem for most of his first term in office. The bad news

* An Obama ad attacking Romney for saying (correctly) in 2003, that dirty coal-fired power plants kill people.

* Partial approval of the Keystone pipeline

and, worst of all, the apparent abandonment of the 2 degree target announced by U.S. Special Envoy for Climate Change Todd Stern

The radio is deplorable, but not significant in the greater scheme of things. Whatever the ad might say, the EPA regulations introduced under Obama are closing down lots of the worst coal-fired power stations. As regards the other two points, the best we can say is that nothing is locked in yet. Still, it’s more depressing stuff from someone who once promised Hope.

Must try harder, Part 2

According to standard economic theory, the least distorting of all taxes is a land tax. This point can be pushed too far – for example, most land is improved to some extent, and that may be capitalized into land values. Nevertheless, given the financial difficulties of state governments, their failure to make use of this revenue source is an indictment, especially since they impose much more distortionary taxes on transactions involving land, such as transfer duties. All states exempt owner-occupied homes and primary producers from land tax, while taxing land sales and purchases across the board. The effect is to benefit existing landowners (except owners of rental housing) at the expense of new home-buyers and tenants.

It appears to be beyond the realm of political possibility to change this, but a government facing a supposed financial crisis, and looking for luxury items to cut, could start with land tax exemptions. As you might expect, Queensland has both a high threshold ($600 000) and a low rate (1 per cent increasing gradually).

None of the usual justifications for Queensland’s low tax effort apply here. Land tax exemptions do nothing to attract business to Queensland. They are a straightforward handout to landowners, mostly wealthy households with investment properties.

Unsurprisingly, this handout attracts zero critical attention from the Commission of Audit which states “Queensland has historically maintained a competitive taxation environment compared to other states.” This is entirely wrong as it applies to land tax. Since land is immobile, there is nothing competitive about low rates of land tax.

US climate change policy: not a hopeless case

I’ve let my Monthly subscription lapse (will resubscribe as soon as I get a moment), so I can’t read the latest piece by Robert Manne, only the summary by John van Tiggelen, but the basic argument is simple, and widely shared. Climate change policy in the US has gone nowhere thanks to the intransigent opposition of the Republicans. I have a couple of comments

First, the policy situation isn’t nearly as bad as might be supposed, given the failure of the Waxman-Markey cap-and-trade bill, and the absence of any real push from the Administration. The fact is, that, in the current US situation, achieving coherent outcomes from legislation is just about impossible. Increasingly, the Obama Administration relies on executive and regulatory actions. In the case of climate change, the important ones are fuel economy standards for cars (CAFE), and EPA regulation of CO2 emissions and other pollution from power stations. Obama has pushed through rules requiring a near doubling of fuel efficiency by 2025. The EPA regulations effectively make new coal-fired power stations uneconomic and require the shutdown of many old stations previously exempted from the Clean Air Act. Reliance on executive action has all sorts of problems, and regulation is an inefficient way of reducing emissions. Still, if Obama is re-elected, the US can expect to see continued reductions in emissions over the rest of the decade. It’s important to observe that, even with the current limited policies, US emissions have already peaked and begun to decline. If Obama wins, the EPA and CAFE regulations will be locked in, and there’s the potential to go further, particularly in the context of an agreement with China.

Second, while its unfortunate that climate change has been entangled in the general craziness of the modern Republican party, this process hasn’t been costless for the Repubs. Given the state of the economy, they ought to be looking forward to a whitewash in November. Instead, Romney is expected to lose, and any Repub Congressional majority will be narrow and fragile. That’s not specifically because of climate change, but a result of the entire political approach taken by the Repubs for the last 20 years, of which delusional claims about climate science are just one example. Whereas until the 1990s, there was a steady drift of disillusioned leftists/liberals (both intellectuals and ordinary voters) to the right, the process is now going in reverse.