Beer, Gas & Leviathan

September 19, 2008 by  

My September 13th article and video “Canada’s 2008 Election: Green? Shift?” led one of my FaceBook friends, Alex, to make the following comment:

Just watched your carbon tax video – you completely botched your economics. You assume that the only thing you can spend post-tax money on is gas, which is blatantly untrue. Now assume two goods – gas and beer (and, to keep them separate, assume this is beer brewed locally from hops and barley grown locally – no gas, all walking).

Before the carbon tax, the average person spends 1 “dime” on gas and 1 on beer, and that half the people prefer each good when forced to choose. After the tax, the gas-preferrers will spend 3 “dimes” on gas and get 1 unit of it, paying 4 in tax, and the beer-preferrers will spend 3 dimes on beer and pay 2 in tax. The government still gets its 3 per person, but gas consumption has been cut in half, because when gas is more expensive people will shift their consumption to beer.

Now, I’m not defending Dion’s plan – it is quite explicitly a tax hike, with $5B or so in new spending. But there’s nothing wrong with a gas tax in theory.

I responded as follows:

Alex, my economics are not botched. You just think I was talking about something I was not talking about: the idea that Dion’s plan is “revenue neutral”.

My point, in the video, was this: Dion is falsely implying – with every “it’s simple, decrease income taxes, shift to pollution” – that his plan will not change any individual’s total tax burden. That’s false. It will increase the tax burden of those who consume fuel, and decrease the tax burden of those who do not. That is the point of my video: to ensure that people understand that, if the Dion tax does not change ones own tax burden, then the tax does not change behaviour (i.e., it does not decrease the consumption of fossil fuels); that if it does discourage fuel consumption, it does so because it is false that it would not increase your own tax burden.

Your example speaks to a different point: the idea that the Dion plan would not change government revenues; that it would be “revenue neutral”. Voter X doesn’t really give a damn about how much money the government has. He cares, instead, about how much money the government is taking from him in particular. Your example shifts the tax burden from beer-drinker Y to gas consumer X, and concludes: See? No harm, no foul.

I say: tell that to X.

I refuse to accept the notion that if one foot is in fire, and the other in ice, Leviathan is comfortably warm. It’s a collectivist notion, and an entirely evil one.

Finally: When your car runs on beer, call me.

“Canada’s 2008 Election: Green? Shift?” by Paul McKeever


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