This passage in Tom Friedman’s most recent offering in the New York Times caught my attention:
I favor corporate tax cuts — big ones. But I would have offset them with a carbon tax, a tax on sugar and a small financial transaction tax. That way, we’d unleash the energy of our corporations while mitigating climate change, spurring the next great global industry — clean power — curbing childhood asthma and diabetes and not adding to our national debt, thereby making ourselves more resilient as a country.
When Trump simultaneously cuts corporate taxes and withdraws America from the Paris climate accord, tries to revive the coal industry by lowering pollution standards and weakens fuel economy standards for U.S.-made cars and trucks, he is vastly adding to the financial debts and carbon debts that will burden our children.
A little back of the envelope calculation should make you see what I did. Americans consume about 150 lb. of sugar per person per year in all forms. At $.65 per lb. that’s a bit less than $35 billion all told. How large a tax on sugar does Mr. Friedman have in mind? Shorter: he might want to discourage the consumption of sugar but a tax on sugar is unlikely to produce much revenue. Fun fact: we already pay more per pound for sugar than practically any other country in the world.
I’m also skeptical of his notions of the power of carbon taxes. I think he’s assuming linearity, nearly always a bad assumption. Both his sugar tax and his carbon tax are powerfully regressive and, at least in the case of a carbon tax, probably won’t have the effects he envisions.
In both cases you could probably have more effect on the consumption of sugar and the emission of carbon by lowering subsidies than you could by increasing taxes. But reducing subsidies can’t be siphoned off to benefit your cronies.
My own view is that we should abandon taxation as a method of social engineering. It carries too many unforeseen secondary effects along with it. Focus on taxation as a means of realizing revenue and take other measures to change behavior.