One+Answer+to+Global+Warming

One+Answer+to+Global+Warming - One Answer to Global...

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September 16, 2007 ECONOMIC VIEW One Answer to Global Warming: A New Tax By N. GREGORY MANKIW IN the debate over global climate change , there is a yawning gap that needs to be bridged. The gap is not between environmentalists and industrialists, or between Democrats and Republicans . It is between policy wonks and political consultants. Among policy wonks like me, there is a broad consensus. The scientists tell us that world temperatures are rising because humans are emitting carbon into the atmosphere. Basic economics tells us that when you tax something, you normally get less of it. So if we want to reduce global emissions of carbon, we need a global carbon tax. Q.E.D. The idea of using taxes to fix problems, rather than merely raise government revenue, has a long history. The British economist Arthur Pigou advocated such corrective taxes to deal with pollution in the early 20th century. In his honor, economics textbooks now call them “Pigovian taxes.” Using a Pigovian tax to address global warming is also an old idea. It was proposed as far back as 1992 by Martin S. Feldstein on the editorial page of The Wall Street Journal. Once chief economist to Ronald Reagan , Mr. Feldstein has devoted much of his career to studying how high tax rates distort incentives and impede economic growth. But like most other policy wonks, he appreciates that some taxes align private incentives with social costs and move us toward better outcomes. Those vying for elected office, however, are reluctant to sign on to this agenda. Their political consultants are no fans of taxes, Pigovian or otherwise. Republican consultants advise using the word “tax” only if followed immediately by the word “cut.” Democratic consultants recommend the word “tax” be followed by “on the rich.” Yet this natural aversion to carbon taxes can be overcome if the revenue from the tax is used to
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One+Answer+to+Global+Warming - One Answer to Global...

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