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Comment by HappyRobot | Hacker News Reader

An episode of Planet Money[0] mentioned that some economists believe income tax is not ideal. Their thinking was that taxation usually discourages the action that is being taxed. Work shouldn't be discouraged. The proposed solution in the episode was to replace the income tax with a carbon tax. Encouraging people to cut down on their carbon footprint with taxes that wouldn't be more than their current income tax.

[0] https://www.npr.org/sections/money/2018/07/18/630267782/epis...

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A carbon tax on people? How would that work without massively invading people's privacy, it seems like it would require tracking everything people do and consume?

(I don't have time right now to listen to the episode unfortunately).

Mostly just tax their cars and consumer products.

Car taxes here in Norway are already sky high for polluting cars, often more than 100% of the non-taxed car value. Fuel prices are around $7.5 USD per gallon.

Yet, car taxes amounts to only 44 billion NOK in income for the state per year (it was 70 billion NOK in 2007, before electric cars became popular here) [1]. The income/fortune tax on the other hand amounts to 248 billion NOK in income to the state per year [2].

Car taxes are nowhere near sufficient, and will never be. If taxes were increased to even more per polluting car, it would just drive even faster adoption to electric cars and a even more rapid car tax income decline. Replacing the income tax with a personal car carbon tax can't work.

[1] https://www.aftenposten.no/okonomi/i/Vy9xV/Bilavgiftene-har-...

[2] https://www.regjeringen.no/contentassets/62bcdd722d344cd0ac6...

> If taxes were increased to even more per polluting car, it would just drive even faster adoption to electric cars and a even more rapid car tax income decline.

Sounds like a good way to lose tax revenue.

Exactly my point.

However, I read the transcript of the podcast now, and it turns out it doesn't actually talk about replacing the income tax with a carbon tax, but rather reducing the income tax and offsetting the reduction with an increase of carbon taxes.

That on the other hand is a great idea, it's much like we're doing in Norway already.

One aspect of a carbon tax (or the tax discussed in the podcast) is a steady tax increase. I guess the intended function is to have the tax revenue stay the same even with declining carbon use. Hopefully carbon tax revenue would go to zero, but I'm sure there would be other things to tax when that happens.

Initially when the parent comment mentioned the income tax, I didn't remember that it would be used to offset a carbon tax. Their point about discouraging work made sense and was the thing I remembered.

Gas, road and car taxes are regressive as well. They disproportionately impact poor people. People who need a car in order to live in cheaper suburbs outside of town. Now maybe a luxury car tax is ok..

You charge a carbon tax at production of the raw feedstocks that contain the carbon (coal, oil and gas), not by tracking individual usage. Everyone pays the carbon tax because the price increase necessarily feeds through the whole economy of products that are made from those feedstocks.

Sounds like a consumption tax. Doesn't that end up causing a higher effective rate on lower earners, and a lower effective rate on higher earners?

Yes, which is then negated with rebates / negative income tax.

So the end result is... lower taxes all around? Where does the deficit get made up?

High income earners don’t get the credit. Similar to how there is an income cap on incentives for EVs in California

But high income earners still benefit from a lower effective rate from the change.

If low income earners pay a higher effective rate than they would under income taxation, which is to be neutralised by credits, and higher income earners pay a lower effective rate, who makes up the deficit?

Yes, it's a consumption tax on something you want to reduce the consumption of, not across the board on all products. Most proposals include an offset (e.g., basic income guarantee or negative income tax rate) for low income earners.

If done on a world-scale this would work great.

It turns out if just one country tries do do that, it's pretty much impossible to correctly tax items that go in or out of the country border though. An error in either direction (too much or too little tax) will severely harm local businesses and the environment.

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