Jared Bernstein:
Broadly speaking, two things matter when it comes to the tax system: First, as just noted, the system needs to raise enough revenues to cover the fiscal obligations and economic challenges we face. Second, our tax system should reduce, not exacerbate, market-driven inequality. Those with the highest incomes should face the highest tax rates, and the public tax collection infrastructure should protect the code’s progressivity by blocking tax avoidance and prosecuting tax evasion. ...
Thus, we need to raise more revenues in a way that is progressive and reduces tax avoidance and evasion. What changes might be made that are consistent with these criteria? While most tax increases should be directed at the top, it’s a mistake to limit tax hikes to the very wealthy. ...
With that said, here’s what I’d recommend to progressively raise more revenue, both on the individual and business side of the tax code. My goal is not to be exhaustive—there are many good ideas I don’t explore, some of which are contained in the recent Obama budget—but to set forth more of a modular framework (as opposed to all-out “tax reform,” a recipe for an endless, fruitless, muddled debate) and provide numerous examples of the type of ideas that fit neatly into it. ...
8. A tax on carbon. This one is obvious and essential. Yes, it would raise taxes on non-rich people (and many such taxes include a rebate to lower-income people who spend more of their income on energy). But it’s a defensible tax increase.
The Obama administration recently proposed a $10-per-barrel tax on oil, which raises $319 billion over ten years. Especially given how cheap oil has recently become, I appreciate their motivation, but I’d rather raise the federal gas tax. This tax is how we fund both highway infrastructure and the federal contribution to public transit, and it has been stuck at 18.4 cents a gallon in nominal terms since 1993. Meanwhile, the costs of maintenance have gone up, as has vehicle mileage, so no wonder the Highway Trust Fund is always broke. We and our politicians have conspired to create a magical world where we can maintain our roads and bridges and support our urban mass transit without paying for it.
A tax on fossil fuels is essential partly because they're socially underpriced. Here, the National Cooperative Refinery Association oil refinery is silhouetted against the setting sun in McPherson, Kansas.
Moreover, and this is of course the other huge reason we need to raise the tax liability on fossil fuels: They’re socially underpriced. This is an opportunity to tax a seriously threatening negative externality, breaking the curse of magical thinking on transportation infrastructure, and raise needed revenues. There’s even been a touch of bipartisan support for the idea. (That’s why I’d go for this over the oil surcharge.) One such plan raises the gas tax by 12 cents a gallon over two years (6 cents per year) and then indexes it to inflation. That would raise $180 billion over ten years.
via prospect.org
