{"id":4385,"date":"2011-12-19T11:00:52","date_gmt":"2011-12-19T16:00:52","guid":{"rendered":"http:\/\/stateimpact.npr.org\/new-hampshire\/?p=4385"},"modified":"2012-02-13T15:43:13","modified_gmt":"2012-02-13T20:43:13","slug":"qa-why-the-patron-saint-of-reagonomics-supports-a-carbon-tax","status":"publish","type":"post","link":"https:\/\/stateimpact.npr.org\/new-hampshire\/2011\/12\/19\/qa-why-the-patron-saint-of-reagonomics-supports-a-carbon-tax\/","title":{"rendered":"Q&A: Why The Patron Saint Of “Reagonomics” Supports A Carbon Tax"},"content":{"rendered":"
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republicanconference \/ Flickr<\/p>

Arthur Laffer says exchanging a carbon tax for the federal income tax is smart economic policy<\/p><\/div>\n

If there is a patron saint of modern Republican tax policy, it is economist Arthur Laffer.\u00a0 Laffer is best known for the \u00a0Laffer Curve<\/a> \u2013 a graph of the theory that under the right circumstances, a cut in tax rates produces higher tax revenues.\u00a0 The Laffer Curve was the keystone of \u00a0so-called “Reaganomics.”<\/p>\n

He was in Manchester recently to present a very different idea \u2013 one that so far Republicans have been slow to embrace.<\/p>\n

Arthur Laffer sees all taxes as essentially bad but some are worse than others.\u00a0 With that in mind, he would like to swap a tax on carbon for our current tax on income.<\/p>\n

“What you do by having an income tax rate reduction across the board, you really provide great incentives for people to work, produce, and increase output,” Laffer said.<\/p>\n

“So I would support a carbon tax in replacement for a progressive income tax.\u00a0 I think that would be very good for the economy and as an adjunct, it would reduce also carbon emissions into the environment.\u00a0 It would have that effect as well.”<\/p>\n

Needless to say, we found this stance more than a little surprising.\u00a0 NHPR’s Jon Greenberg recently spoke in-depth with Laffer about his unorthodox position on carbon taxation.<\/p>\n\n

Q: <\/span>Are you proposing this out of concern for climate change, national security, or the economy?<\/p>\n

A: <\/span>No, no.\u00a0 I don’t do it on national security or climate change at all.\u00a0 I do it for pure economics.\u00a0 I’m worried about economic growth in the United States.\u00a0 And the creation of jobs, output , and employment.\u00a0 And if you tax people who work, you’re going to get less people working.\u00a0 And what the carbon tax would do is remove the tax from people who work and put it on a product in the ground. And what would be very beneficial for the economy, pure and simple.<\/p>\n

Q: <\/span>Here in NH, many people with low wage jobs live far from work because housing costs too much nearby.\u00a0 So they spend a lot on gas but any taxes connected to their wages are very low.\u00a0 Under your plan, they would pay more for gas.\u00a0 How do you make sure it would even out?<\/p>\n

A: <\/span>A carbon tax by itself would make driving more expensive, that’s very true.\u00a0 But in exchange for that, there are going to be more jobs, more output, more employment and more products available.\u00a0 So really, as long as you’re going to collect the revenues you’re going to collect, you’re going to have to trade-off one tax for the other.\u00a0 And that’s what this proposal does.<\/p>\n

Q: <\/span>But for the person who has that low-wage job and that long drive to work, at the end of the day, you really can’t guarantee that they will be held harmless by this proposal.<\/p>\n

A: <\/span>Well, in economics you can never guarantee anything so long as it’s in the future.\u00a0 You can’t.\u00a0 But this by all research would be clearly preferable for the overall economy, and as a derivative, these people would have higher paying jobs, and maybe even some of them closer.\u00a0 And maybe some of them would take public transportation.<\/p>\n

There are all sorts of ways of substituting in this process that I think even people who live far away from their jobs and have low paying jobs, I think they would be better off under this proposal.<\/p>\n

Q: <\/span>The spokesman for Newt Gingrich told Politico “If we want to talk about tax reform, he\u2019ll get Art Laffer and several other economists to give feedback.”\u00a0 You must have talked about a carbon tax with Mr. Gingrich.\u00a0 Are you discouraged that he has never mentioned it in his tax reform proposals?<\/p>\n

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futureatlas \/ Flickr<\/p>

Under Laffer's plan, NH workers wouldn't be paying an income tax...but they'd pay more at the pump<\/p><\/div>\n

A: <\/span>Number one, I have never talked about a carbon tax with Newt Gingrich; never once.\u00a0 And I’m not disappointed.\u00a0 You know, he’s not president yet.\u00a0 When you sit down and do a full proposal, you want to look at the total of tax reform, not one specific part.\u00a0 And at this stage in his political career, it’s not the right time to talk about the carbon tax.\u00a0 I don’t think.\u00a0 It’s not center stage.\u00a0 The center stage is lower rates, broader base, flat tax system.\u00a0 And as a result, what you want to do is segregate the sin taxes out.\u00a0 The sin taxes are there not so much to raise revenues but to discourage behavior.\u00a0 Speeding tickets, fines for doing other things.\u00a0 You would put a carbon tax in that category.\u00a0 And when you put it in that category because you think carbon should be reduced, then you would want to make sure that you have an offset tax reduction so you don’t have a slow down in the overall economy.\u00a0 That’s all.<\/p>\n

Q: <\/span>Has the tone of the conversations that you’ve had with people about this idea of a carbon tax changed since the time when you first began talking about it, some time in the mid-2000’s?\u00a0 There’s been less acceptance of the idea of climate change over that time.<\/p>\n

A: <\/span>Yep, I think that’s true.<\/p>\n

Q: <\/span>Has the tone of the conversation changed?<\/p>\n

A: <\/span>Yes.\u00a0 I just get the sense from the tone of the public conversation that the enthusiasm towards climate change has diminished dramatically.\u00a0 I just think that if you have a global risk there, you want to eliminate Type One errors versus Type Two errors.\u00a0 Type One is, if you make a mistake and if carbon emissions do cause global warming, and if global warming is as serious a problem as people said it was.\u00a0 If that’s true, there’s really no harm in putting on a carbon tax in exchange for an income tax.\u00a0 And it covers your risk factors.\u00a0 But I never wanted to make any comments as to whether global warming was correct or not.\u00a0 It would be foolish.\u00a0 Everyone would see right through me because they know I don’t know.<\/p>\n

Q: <\/span>You certainly have noticed that there are very few Republicans who latch on to this idea.\u00a0 And I just wonder, how do you feel about that?<\/p>\n

A: <\/span>I don’t mind it.\u00a0 As my former colleague, Milton Friedman, put it, one man and the truth is a majority.\u00a0 That’s my economics.\u00a0 I’ve been wrong in my life many times unfortunately, but I don’t think I’m wrong on this one.\u00a0 I do think a carbon tax is a more efficient tax than is a progressive income tax.\u00a0 That I really do believe.\u00a0 Now, what I’d love to see is the whole tax code reformed.\u00a0 That’s the key to do. \u00a0 And in that tax code reform, a carbon tax may or may not fit.\u00a0 But right now, clearly, a carbon tax is less damaging than is a progressive income tax, dollar for dollar in revenue.<\/p>\n

Economist Arthur Laffer praises former vice president Al Gore for advocating a similar tax plan many years ago.\u00a0 Laffer believes Republican antipathy for the idea stems from the assumption that a carbon tax would come on top of current taxes.\u00a0 He would oppose that too.\u00a0 Laffer says he welcomes the chance to discuss his proposal with any Democrat or Republican who cares to\u00a0 listen.<\/p>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

If there is a patron saint of modern Republican tax policy, it is economist Arthur Laffer.\u00a0 Laffer is best known for the \u00a0Laffer Curve \u2013 a graph of the theory that under the right circumstances, a cut in tax rates produces higher tax revenues.\u00a0 The Laffer Curve was the keystone of \u00a0so-called “Reaganomics.” He was […]<\/p>\n","protected":false},"author":58,"featured_media":4387,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[54],"tags":[497,501,244,521],"acf":[],"_links":{"self":[{"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/posts\/4385"}],"collection":[{"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/users\/58"}],"replies":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/comments?post=4385"}],"version-history":[{"count":19,"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/posts\/4385\/revisions"}],"predecessor-version":[{"id":4403,"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/posts\/4385\/revisions\/4403"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/media\/4387"}],"wp:attachment":[{"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/media?parent=4385"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/categories?post=4385"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stateimpact.npr.org\/new-hampshire\/wp-json\/wp\/v2\/tags?post=4385"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}