In November 2014, Massachusetts voters may accept a adventitious to vote on a revenue-neutral “Carbon Tax Initiative,” which has been blithely accustomed by the Boston Globe. Additionally, a bill is currently afore the Massachusetts accompaniment assembly which would authorize a revenue-positive carbon tax. While carbon taxes can alter in their exact form, in accepted they are taxes levied on producers who afford CO2: which mostly agency ability companies, accomplishment firms, and transportation.
Citing a abstraction performed by Regional Economic Models, Inc, the election initiative’s backers at the Committee for a Green Economy, an adjunct of the Citizens Climate Lobby, adduce to use revenues calm from the carbon tax to lower several taxes. Half of revenues aloft would be put appear blurred Massachusetts’ accumulated assets tax, a division would be acclimated to lower its alone assets tax, and a division would be acclimated to lower its sales tax. By contrast, the revenue-raising H. 2532 would actualize a carbon tax which would primarily lower accumulated tax ante and access assorted assets tax credits and exemptions, like the claimed absolution and the EITC, and again use actual acquirement to access spending.
However, a carbon tax faces austere problems. Consumption taxes are alone non-distortionary if they are evenly-applied, and, like best customs taxes, carbon taxes can be actual uneven. Legal, healthcare, and added services, which already accept best taxation due to actuality absolved from the sales tax, accept actual low carbon footprints: and appropriately would be alike added preferentially advised beneath a carbon tax. Meanwhile, manufacturers would ache as the carbon tax confused spending abroad from their added carbon-intensive products.
Furthermore, the bodies of Massachusetts may ache if they apparatus a carbon tax at the accompaniment level. The Committee for a Green Abridgement states that they archetypal their plan off of the carbon tax implemented in British Columbia, but they don’t acknowledgment that abounding of the carbon-intensive industries in British Columbia are industries like mining, accustomed gas, and oil sands, which are carefully angry to the concrete administration of British Columbia. Massachusetts has a actual altered economy, and its above carbon-intensive industry is manufacturing, which is added mobile. If Massachusetts makes accomplishment essentially added expensive, companies could backpack to neighbors in Connecticut or Rhode Island, apprehension the carbon tax abortive from an ecology perspective, as able-bodied as abbreviating any accepted access in revenue.
The bill proposed in the assembly has alike added problems. It proposes a blueprint for abbreviation the accumulated tax amount on a bit-by-bit basis, but won’t abate the assets tax amount at all. Rather, it aloof increases tax credits and exemptions: which alone makes the tax cipher alike added distortionary. As absorbing as the abstraction of a “grand bargain” of creating a carbon tax to alter an assets tax is, an amplification of tax credits is not absolute tax reform. Without real, abiding amount cuts, these proposals assume acceptable to actualize bit-by-bit tax increases and an alike added distortionary tax code.
For added on carbon taxes, bang here.
For added on Massachusetts, bang here.
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