HPRgument Blog — June 5, 2010 11:57 pm

Do Conservatives “Just Hate All Taxes”?

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In a generally well-written article, HPR staff writer Will Rafey recently addressed the need to raise the gas tax “to make the private cost of driving a car reflect its actual social costs: global warming, air pollution, traffic congestion, and highway maintenance,” and how difficult this has become in the current political climate. I have no disagreement with the thrust of his argument, but would respectfully take issue with his characterization of what he calls the “anti-tax establishment.”

In Will’s article, William Gale, senior fellow at the Brookings Institution and co-director of the Tax Policy Center, opines that the anti-tax movement, in which he includes Americans for Tax Reform and the various Tea Parties, “just hate all taxes,” and will therefore oppose any tax increase. But it’s not entirely that simple. I don’t presume to speak for ATR or the Tea Parties per se, but fiscal conservatives generally recognize what Chief Justice John Marshall observed in McCulloch v. Maryland, that “The power to tax involves the power to destroy.” Government should not use the tax code to pick winners and losers, so to speak, since it can effectively outlaw activities through excessive taxation, hindering a given industry to the point that it can no longer operate profitably. In the next section of the article, Will notes that the gas tax “raises a thorny issue of fairness,” since some citizens drive more than others; this fairness question in fact applies to all excise taxes, and places government in the position of arbitrarily redistributing income from one group of citizens to another in the name of what it considers the general welfare. Citizens and politicians, moreover, frequently disagree as to just what constitutes the “general welfare,” and therefore differ as to which industries and activities should be promoted and which discouraged. Given these facts, it is better in most cases to allow the market to answer this question, and to confine federal tax policy to either a flat income tax or a consumption tax.

Carbon consumption is a very rare instance in which a corrective tax is warranted, given the broad bipartisan consensus that America must wean itself from dependence on oil: even citizens who reject the notion—or the urgency—of climate change would generally agree on the need to curb the massive wealth transfer to rogue oil-producing countries. Will is correct in his implication that what he calls the “anti-tax establishment” thinks taxes in general are too high and would oppose any tax increase. What he appears to overlook is that it is not necessary to raise the overall tax rate in order to discourage gas consumption through the tax code. He briefly mentions that rebates might be used to “correct the regressive elements of the tax,” but why not simply return the entirety of the gas tax revenue through a rebate? Better yet, why not use the extra revenue from the gas tax increase as a means to cut the income tax rate to both encourage energy conservation and alternatives and spur economic growth at the same time? I’ll confess I don’t know how the “anti-tax establishment” would respond to such a proposal, but I find it hard to believe that a revenue-neutral proposal that reduces our dependence on sponsors of terrorism and involves an income tax rate cut would elicit significant opposition from the Right.

Parenthetically, a gas tax is not the only way to reduce oil consumption, and probably not the best. As I have noted in the Harvard Salient (though I am by no means the first to do so), a revenue-neutral carbon tax would be more comprehensive, and probably cheaper to collect. I have also explained in the HPR that urban traffic congestion could be substantially reduced through congestion pricing, which has been used with great success abroad.

All that said, Will is absolutely right that government should take action to reduce gas consumption, that the tax code is probably the best way to do this, and that the American political environment makes this extraordinarily difficult. But it’s not fair to blame the “anti-tax establishment” as an obstacle to reform when what he is talking about could easily be achieved without a net tax increase.

Photo Credit: Wikipedia.

  • Jeremy Patashnik

    Peyton, I don’t think Will lumped all fiscal conservatives together in the “anti-tax establishment” group. In fact (as you mention), in his article, he very clearly singled out two groups, the Tea Party and the ATR, who do take the position that all tax increases should be opposed.

    I don’t think it’s unreasonable to say that those two groups oppose all tax increases. In fact, here’s the very first line from the “About” page on the ATR’s website: “Americans for Tax Reform (ATR) opposes all tax increases as a matter of principle.”

    And how many times have we heard Sarah Palin, one of the Tea Partiers’ champions say about cap and trade, “it’s just cap and tax.”

    You raise legitimate points about the gas and carbon taxes, but I think Will’s point in the article is that there is a significant–and increasingly powerful–portion of the electorate who doesn’t even want to have that debate. That is to say, there is a movement that is opposed to the gas tax, the carbon tax, or a cap-and-trade system not because they may be non-optimal taxes, but simply because they ARE taxes.

    I agree with you: there are several ways we could implement energy taxes that would make society better off, but the point is it’s difficult to have these discussions because of the part of the electorate that IS against all taxes.

  • http://harvardsalient.com Peyton Miller

    Jeremy,
    I don’t think Will lumped all fiscal conservatives together in that way either, though I would certainly consider myself a part of what he calls the “anti-tax establishment.” I’m sure I have some differences with ATR, and certainly with the Tea Partiers, but I completely agree with them that taxes are already too high, and that taxes should absolutely not be raised — if they are changed at all it should be to lower them. I assume, incidentally, that when you refer to “the part of the electorate that IS against all taxes,” you merely mean they are against all tax increases; this would include me.

    It is possible, as I mentioned, to raise the gas tax (or establish a carbon tax, etc.) without raising the overall tax rate by returning revenues that accrue from the gas tax increase to the people through either a rebate or a rate reduction in some other tax. I’m normally skeptical of these kinds of targeted excise taxes for the reasons I noted, but in this case I’d be in favor of this strategy.

    Of course, it’s possible groups like ATR and the Tea Partiers would still oppose such a policy, but they would have to do so on some other grounds than their opposition to any tax increases (because it would NOT be a tax increase, but merely a revenue-neutral change in tax policy that shifts the burden toward some and away from others). And as I mentioned, there are reasons to think they’d be for it: it could be used to cut the income tax and would curb the transfer to wealth to sponsors of terrorism.

    My point is that there is a way to discourage carbon consumption through the tax code, but that this does not require increasing taxes overall, which is specifically what the “anti-tax establishment” opposes. It’s not fair to indict groups like ATR and the Tea Partiers as obstacles when we’re not even discussing these solutions.

  • Will Rafey

    I agree with a lot of what’s been side on either side of this discussion, and I’m excited that this article provoked such interest.

    Jeremy is absolutely right — my point was about those extremists who dogmatically oppose all taxes, placing their faith in a mythic “free market” without realizing that the market is always artificial and possible only within a highly regulated environment which must be constantly tweaked to maximize social benefits. State intervention is inevitable. For instance, the difference — in principle — between assigning damages to individuals in a lawsuit over intellectual property rights violations and taxing individuals for gasoline consumption to pay for the resulting environmental or infrastructural damage is negligible. This income redistribution will always be arbitrary, but it is a function of the law to make it the least arbitrary it can possibly be.

    This is why, as I point out — and has not been disputed — there are few rational reasons to oppose a gas tax.

    There are, however, ways to refine a gas tax by fitting it within the existing tax code. I am of course in favor of an economy-wide carbon tax, which is simply a gas tax plus a tax on all other types of CO2-emitting consumption.

    I’m engaging this discussion because I believe my article (if only briefly, given writing constraints) does engage the issue of revenue redistribution.

    A revenue-neutral gas (or carbon) tax would help reduce the externalities of gas consumption, but the reason why it’s not immediately the best choice is because one of the most valuable components of the gas tax is its ability to raise revenue.

    That revenue — as Henry Lee, Director of the Environment and Natural Resources Program at Harvard’s Belfer Center for International Affairs, pointed out in my article — might be crucial to reverse the budget deficit in federal transportation spending. As I explained, the federal highway trust fund is in such dire straits that it needed subsidies from the general federal budget in 2008 and 2009 for the first time in its fifty-year history. There is consensus that new revenue sources need to be found for highway and mass transit construction and maintenance, and it makes sense that the revenue should be raised from those who use the roads most.

    Similarly, if we’re serious about developing alternative energy, using gas or carbon tax revenue to directly subsidize R&D — to overcome the oft-cited “valley of death” that stifles innovation — is far more efficient way of doing it than lowering property taxes, which would free up an equal amount of capital but with no guarantee that any of it would go toward renewable energy.

    Perhaps there are ways to deal with these budget shortfalls without raising taxes; I certainly hope this is the case. Either way, people are discussing these solutions. The idea of “cap-and-dividend,” for instance, is becoming a favorite topic among those reporting on a future, politically salient climate bill.

    As Jeremy wrote, groups like ATR and the Tea Partiers deserve to be condemned because they do not want to have this discussion at all. Claiming that the possibility a tax can be revenue-neutral, likewise, cannot end the need for further analysis. It is one alternative among many, and it must be placed in context of the very real financial concerns that plague our infrastructure budget.

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