A Carbon Tax Isn’t That Regressive

A carbon tax will hit poorer populations harder than wealthier ones. $1,000 means a lot more to someone whose annual income is $20,000 than it does to someone making $200,000.

Commute costs will rise. Consumer goods will get more expensive. Food prices will go up.

But income tax rates could be adjusted to offset this new tax. We could shift the revenue requirement out of the bottommost income tax tier and plug it into the top one. Let’s make the first $20,000 of income (for single people) and $40,000 of income (for married couples) income-tax-free. About 93% of people in the lowest quintile of income (who make about $17,000 per year) already pay no income tax. Let’s even exempt those levels from Social Security and Medicare taxes, and transfer that revenue requirement to higher income brackets, too.

I know the anti-tax arguments. “Taxes discourage investment.” “Taxes motivate the wealthy to invest and build overseas, where rates are lower.” If they discourage investment, why doesn’t that argument apply to labor—that they discourage work? And as to capital flight overseas, I don’t want to hear another word out of such people about patriotism, ever.

You would think the wealthy would be agreeable to slightly higher taxes just out of self-interest. Both the American and French Revolutions were reactions to concentrated, aristocratic, inherited wealth and power. I’d argue that the entire point of democracy is to prevent destabilizing wealth accumulation. All freedoms flow from the power to short-circuit wealth concentration (and therefor power concentration) by peaceful means. If wealth and power get too concentrated, then the unwealthy can vote to check, redirect, or reverse that concentration.

But It’s Somewhat Regressive. So What?
A carbon tax is no more regressive than capitalism itself. That’s what wealth means—you can afford more or less depending on how much money you have. Wealthier people consume more, so they’ll pay more in carbon taxes.

Even the poor can control at least a portion of how much energy they use. We’re not trying to expand consumerism with this tax. Quite the opposite. Turn down the thermostat. Log less screen time. Drive and fly less. Organize for broad social changes to structurally reduce energy use.

Much more regressive is to allow the continued build-up of the tax debt on our future that’s implicit in climate change. That’s truly regressive, because no one will have any control on how that is apportioned. We all get an equal share of doom.