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Author Topic: Tax shifting
Adam T
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posted 06 May 2006 10:54 PM      Profile for Adam T     Send New Private Message      Edit/Delete Post  Reply With Quote 
Tax Shifting. This is especially big in Europe among left wing parties. This is the idea of taxing environmentally unsound practices while reducing income and other sales taxes to make the tax shift 'revenue neutral'. Sweden is a leader in this. The concept, backed by many economists, is that the full cost to society of 'externalities' (costs born by society as a whole rather than the specific company or individual incurring them) are not reflected in free market prices (essentially society subsidizes the cost). Full costing through tax shifting improves efficiency in the economy through having full prices fully reflect the true costs. A simple example of this is to subsidize a person's purchasing of a hybrid vehicle (perhaps through tax credits) while putting a surtax on the purchase of an SUV.

Former Environment Minsiter Stephane Dion is going to make this a major piece of his leadership campaign. The problem in the Canadian perspective of this tax shifting is Alberta. Any serious attempt to tax shift would involve major carbon taxes, an anathema to Alberta and obviously a non starter for a practical Canadian politician. My understanding is that Stephane Dion's proposals leave out carbon taxes. This is a major compromise in tax shifting, but his proposals are, at least, a start.

Start with what can be implemented first, show they work, and then browbeat Alberta.

Any thoughts? I'm surprised actually that Layton hasn't been all over this for years.


From: Richmond B.C | Registered: Nov 2003  |  IP: Logged
M. Spector
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posted 07 May 2006 12:10 AM      Profile for M. Spector   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
How do we know what the "true costs" of the externalities are? For example, is it possible to put a price tag on the environmental devastation being wrought in the Alberta tar sands? What is the true cost of acid rain, or the pollution of Lake Erie?

Another problem is that extremely profitable but environmentally unsound practices may be allowed to continue because the profit levels exceed the taxes (even if the taxes represent the "true cost" of the externalities). Then the tax becomes in effect, a licence fee for permission to destroy the environment.

Another problem is that even if you can put a true dollar value on the externalities, what does the government do with the tax money? Will it be segregated from other revenues and used to undo the damage done by the polluters, or will it go into general revenues and be spent on other important things like health care and education? And can money really compensate for the loss of a habitat, or the destruction of a salmon river?

And why does the government have to go around stooping and scooping behind the private industrial dog? Shouldn't industry be made to clean up their own mess, if it can be done, and if it can't, forbidden to make the mess in the first place? Tax shifting just lets the polluters avoid having to be conscientious stewards of the environment.

The capitalist market system is certainly flawed as a way of valuing commodities, for the reasons you mentioned. But rather than distorting the market with tax shifts, maybe we should think about replacing capitalism with another system, one that puts human need and ecology ahead of private profit.

Applying tax shifting in a capitalist system will result in increasing the price of some commodities beyond that which consumers are able or willing to pay. In international markets for our exports, our expensive commodities will have to compete with much cheaper ones produced in countries where environmental costs are more externalized.


From: One millihelen: The amount of beauty required to launch one ship. | Registered: Feb 2005  |  IP: Logged
Adam T
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posted 07 May 2006 05:15 AM      Profile for Adam T     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Another problem is that even if you can put a true dollar value on the externalities, what does the government do with the tax money? Will it be segregated from other revenues and used to undo the damage done by the polluters, or will it go into general revenues and be spent on other important things like health care and education? And can money really compensate for the loss of a habitat, or the destruction of a salmon river?

The government gets no new net revenue because the shift is revenue neutral, that's why it's called a shift. Positive externalities get a tax credits, non externalities see taxes reduced on them and negative externalities get taxed to their estimated true cost.

quote:
How do we know what the "true costs" of the externalities are? For example, is it possible to put a price tag on the environmental devastation being wrought in the Alberta tar sands? What is the true cost of acid rain, or the pollution of Lake Erie?

Of course you can't estimate 100%. The perfect should not be the enemy of the good, as the saying goes. Just because you can't get 100% accuracy doesn't mean you can't do better than the way things are at present.

quote:
Applying tax shifting in a capitalist system will result in increasing the price of some commodities beyond that which consumers are able or willing to pay. In international markets for our exports, our expensive commodities will have to compete with much cheaper ones produced in countries where environmental costs are more externalized.

Yes, and taxes will go down on business practices that are externality neutral and companies that are externality positive will receive tax credits. Both of these will create competitive advantages for companies in those areas.


From: Richmond B.C | Registered: Nov 2003  |  IP: Logged
Sanityatlast
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posted 07 May 2006 12:07 PM      Profile for Sanityatlast        Edit/Delete Post  Reply With Quote 
quote:
Originally posted by M. Spector:
How do we know what the "true costs" of the externalities are? For example, is it possible to put a price tag on the environmental devastation being wrought in the Alberta tar sands? What is the true cost of acid rain, or the pollution of Lake Erie?

Another problem is that extremely profitable but environmentally unsound practices may be allowed to continue because the profit levels exceed the taxes (even if the taxes represent the "true cost" of the externalities). Then the tax becomes in effect, a licence fee for permission to destroy the environment.

Another problem is that even if you can put a true dollar value on the externalities, what does the government do with the tax money? Will it be segregated from other revenues and used to undo the damage done by the polluters, or will it go into general revenues and be spent on other important things like health care and education? And can money really compensate for the loss of a habitat, or the destruction of a salmon river?

And why does the government have to go around stooping and scooping behind the private industrial dog? Shouldn't industry be made to clean up their own mess, if it can be done, and if it can't, forbidden to make the mess in the first place? Tax shifting just lets the polluters avoid having to be conscientious stewards of the environment.

The capitalist market system is certainly flawed as a way of valuing commodities, for the reasons you mentioned. But rather than distorting the market with tax shifts, maybe we should think about replacing capitalism with another system, one that puts human need and ecology ahead of private profit.

Applying tax shifting in a capitalist system will result in increasing the price of some commodities beyond that which consumers are able or willing to pay. In international markets for our exports, our expensive commodities will have to compete with much cheaper ones produced in countries where environmental costs are more externalized.


Well thought out comments above.

I'm also concerned about the license to pollute if a surcharge or tax of some type is paid. The environment and ecosystems have their own integrity beyond that of humans. A problem with some lobbying is, for example, targeting it against pollution in the stream that will impact some town downstream, etc. Otherwise, saying that if a logging or mining company can 'cleanly' harvest resources, it has a green light to cutting down the forest or whatever. Protecting human health or imposing a tax didn't save the forest.

Re a carbon tax. Won't happen in our lifetime unless it doesn't impact Alberta revenues. Best to put a 10,000 surcharge on all non-commercial vehicles over 4 cylinders...then measure 'all that support' in Ontario.


From: Alberta | Registered: Apr 2006  |  IP: Logged
Sanityatlast
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posted 07 May 2006 12:18 PM      Profile for Sanityatlast        Edit/Delete Post  Reply With Quote 
Adam T.

A lot of what you write makes sense in theory. Unfortunately, Canada is largely an export economy and our biggest partner, the USA would have to take the lead. If it costs 2,000 more to build a car in Windsor to compensate for environmnetal variables then there will be no cars made in Windsor. Even the recent increase in the value of the Canadian dollar is a burden for Canadian manufacturers.

The USA won't impose any such tax in the near future. The loss of manufacturing jobs is a hot issue and no Congressman is going to encourage even more jobs going to China or Mexico.


From: Alberta | Registered: Apr 2006  |  IP: Logged
jester
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posted 07 May 2006 12:40 PM      Profile for jester        Edit/Delete Post  Reply With Quote 
[QUOTE]Originally posted by M Spector:

The capitalist market system is certainly flawed as a way of valuing commodities, for the reasons you mentioned. But rather than distorting the market with tax shifts, maybe we should think about replacing capitalism with another system, one that puts human need and ecology ahead of private profit.[end quote]


Good analysis,Spector. The prevailing thought on the left is to replace the capitalist system.With what? What is your political solution to solving the problems capitalism fails to address?

In previous discussions,other posters advocate nationalising industries such as oil without compensation to the owners.It can be done by simply passing an act of parliament they assert.

Simplistic solutions to complex problems are unworkable.Tax shifting and other tax mechanisms that place place emphasis on the true cost (or perhaps the social cost) of economic endeavors may well be a path to pursue.

[ 07 May 2006: Message edited by: jester ]


From: Against stupidity, the Gods themselves contend in vain | Registered: Jan 2006  |  IP: Logged
M. Spector
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posted 07 May 2006 03:24 PM      Profile for M. Spector   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Adam T:
The government gets no new net revenue because the shift is revenue neutral, that's why it's called a shift. Positive externalities get a tax credits, non externalities see taxes reduced on them and negative externalities get taxed to their estimated true cost.
This is even worse than I thought.

What you are describing is a transfer of wealth from the polluters to the non-polluters through the tax system. Then what are the non-polluters supposed to do about the pollution? Do I have to form an organization of non-polluting taxpayers to pool our tax credits so that we can afford to clean up the environment? Why doesn't the government use the pollution tax to actually do something to remedy the damage? Don't we have governments for the purpose of protecting the commons?

"My power company emitted 25 million tons of sulphur dioxide last year and all I got was this lousy $50 tax credit."


From: One millihelen: The amount of beauty required to launch one ship. | Registered: Feb 2005  |  IP: Logged
Naci_Sey
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posted 07 May 2006 05:20 PM      Profile for Naci_Sey   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by M. Spector:
The capitalist market system is certainly flawed as a way of valuing commodities, for the reasons you mentioned. But rather than distorting the market with tax shifts, maybe we should think about replacing capitalism with another system, one that puts human need and ecology ahead of private profit.

I largely agree with the points mentioned elsewhere in your post and also would welcome a system that replaces capitalism. However, I don't see the latter happening anytime in the foreseeable future and for that reason, think proposals around tax shifting are definitely worth looking at. Some of the suggestions do address how, e.g., low-income people might be protected from having to pay extra taxes to fill up their older cars or furnaces.

From: BC | Registered: Apr 2006  |  IP: Logged
M. Spector
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posted 07 May 2006 05:56 PM      Profile for M. Spector   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Naci_Sey:
I largely agree with the points mentioned elsewhere in your post and also would welcome a system that replaces capitalism. However, I don't see the latter happening anytime in the foreseeable future and for that reason, think proposals around tax shifting are definitely worth looking at.
I don't see tax-shifting being implemented any time in the foreseeable future either, so which one should I be fighting for - replacing capitalism or implementing a tax reform that suffers from all the flaws I have enumerated above?

From: One millihelen: The amount of beauty required to launch one ship. | Registered: Feb 2005  |  IP: Logged
jester
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posted 07 May 2006 06:24 PM      Profile for jester        Edit/Delete Post  Reply With Quote 
quote:
Originally posted by M. Spector:
I don't see tax-shifting being implemented any time in the foreseeable future either, so which one should I be fighting for - replacing capitalism or implementing a tax reform that suffers from all the flaws I have enumerated above?


It appears flaw enumerating is more your style than flaw fixing.I assume constructive criticism to mean criticising weakness in order to improve,ie:create a better policy or suggest an alternative.

Leftists have great antipathy to the capitalist system but either have no answers to the concerns regarding capitalism or promote their solutions in a manner that does not engender popular support.

Grandiose socialist schemes to replace capitalism are the refuge of ideologues.Incremental positive change is a solution.


From: Against stupidity, the Gods themselves contend in vain | Registered: Jan 2006  |  IP: Logged
Adam T
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posted 07 May 2006 06:29 PM      Profile for Adam T     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
A lot of what you write makes sense in theory. Unfortunately, Canada is largely an export economy and our biggest partner, the USA would have to take the lead. If it costs 2,000 more to build a car in Windsor to compensate for environmnetal variables then there will be no cars made in Windsor. Even the recent increase in the value of the Canadian dollar is a burden for Canadian manufacturers.

Actually, at least 60% of the Canadian economy is domestic: producers making stuff that are bought by Canadians (not that you didn't know what 'domestic' meant ).

You are obviously correct that I am posting a theoretical idea, that is why I am looking for discussion of the practical consequences. In the specific case above, tax shifting would promote car manufacturers to make hybrids and other environmentally friendly cars in Canada. Thanks to California laws, all car companies are required to make a minimum number of environmentally friendly cars.

quote:
This is even worse than I thought.
What you are describing is a transfer of wealth from the polluters to the non-polluters through the tax system. Then what are the non-polluters supposed to do about the pollution? Do I have to form an organization of non-polluting taxpayers to pool our tax credits so that we can afford to clean up the environment? Why doesn't the government use the pollution tax to actually do something to remedy the damage? Don't we have governments for the purpose of protecting the commons?

M Spector, I hate to be so blunt, and to come across as so arrogant, but I have to say it's clear you have absolutely no understanding of economics or economic concepts.

Tax shifting would, I'd say this slowly if I could, DISCOURAGE production of things that have negative externalities and ENCOURAGE production of things that have neutral or positive externalities. That is, production of things that harm the environment or are socially harmful in other ways would DECREASE. There are thousands of studies that show that economics actors (i.e producers and consumers) respond to incentives such as tax credits. Raising the cost of production on things that harm the environment by increasing taxes on them would automatically decrease their production.

quote:
The capitalist market system is certainly flawed as a way of valuing commodities, for the reasons you mentioned. But rather than distorting the market with tax shifts, maybe we should think about replacing capitalism with another system, one that puts human need and ecology ahead of private profit.

Again, promoting a concept as vague and meaningless as 'replace capitalism with another system' shows to me only that you have no understanding of economics.

[ 07 May 2006: Message edited by: Adam T ]


From: Richmond B.C | Registered: Nov 2003  |  IP: Logged
Naci_Sey
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posted 07 May 2006 06:34 PM      Profile for Naci_Sey   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by M. Spector:
I don't see tax-shifting being implemented any time in the foreseeable future either, so which one should I be fighting for - replacing capitalism or implementing a tax reform that suffers from all the flaws I have enumerated above?

Parties are starting to talk about tax-shifting. Not one (that I know of) is talking about replacing capitalism for a better economic system. Yes, one could argue that socialism, NDP-style, would be such a system; however, how likely is it that we'll have a federal NDP government in the foreseeable future?

I've dreams of a non-market system, but the realist in me says 'not gonna happen' in my, or my children's lifetime.


From: BC | Registered: Apr 2006  |  IP: Logged
abnormal
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posted 07 May 2006 06:44 PM      Profile for abnormal   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Tax shifting would, I'd say this slowly if I could, DISCOURAGE production of negative externalities and ENCOURAGE production of neutral or positive externalities. That is, production of things that harm the environment or are socially harmful in other ways would DECREASE. There are thousands of studies that show that economics actors (i.e producers and consumers) respond to incentives such as tax credits. Raising the cost of production on things that harm the environment by increasing taxes on them would automatically decrease their production.

I think you're right as far as you go. However, unless "the world" signed on to the idea the effect is that the production of things that are harmful to the environment would shift to places that don't levy taxes based on environmental impacts or whatever.

In the example given - if it were to cost $2,000 more per car to produce it in Windsor than Detroit, guess where the cars will be built. Nevermind that they'll ultimately be sold in Canada, they'll be manufactured where the cost is lowest.

Of course you could try to apply tariffs based on how environmentally friendly the manufacturing process is and how heavily the producing country taxes environmental stuff but somehow I don't think that will work very well. Any country could do an endrun around this sort of thing by taxing environmentally unfriendly things very heavily and then giving offsetting tax credits elsewhere.

[ 07 May 2006: Message edited by: abnormal ]


From: far, far away | Registered: Aug 2001  |  IP: Logged
Adam T
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posted 07 May 2006 06:56 PM      Profile for Adam T     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
I think you're right as far as you go. However, unless "the world" signed on to the idea the effect is that the production of things that are harmful to the environment would shift to places that don't levy taxes based on environmental impacts or whatever.

In the example given - if it were to cost $2,000 more per car to produce it in Windsor than Detroit, guess where the cars will be built. Nevermind that they'll ultimately be sold in Canada, they'll be manufactured where the cost is lowest.


Yes, that is a concern. Tax shifting on production would have to start with things where production can't easily be shifted from one country to another and then expanded from there as, hopefully, international agreements come into effect.

However, tax shifting on consumption could still take place as before. Although some international trade experts would probably disagree with me, tariffs and surtaxes are not the same. Canada could place surtaxes on SUVs (for instance) whether they are produced domestically or in the U.S. This would still discourage their consumption which would lead to a reduction in their production (basic law of supply and demand). Then, tax credits on things like hybrid vehicles would increase their consumption and lead to an increase in their production).

[ 07 May 2006: Message edited by: Adam T ]


From: Richmond B.C | Registered: Nov 2003  |  IP: Logged
M. Spector
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posted 08 May 2006 12:24 AM      Profile for M. Spector   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Naci_Sey:
Not one (that I know of) is talking about replacing capitalism for a better economic system.
You're hanging around with the wrong kind of people.
quote:
Yes, one could argue that socialism, NDP-style, would be such a system;
There's no way NDP-style social democracy is such a system. It's capitalism with a smiley-face.
quote:
I've dreams of a non-market system, but the realist in me says 'not gonna happen' in my, or my children's lifetime.
That's because people have to do more than just dream.

From: One millihelen: The amount of beauty required to launch one ship. | Registered: Feb 2005  |  IP: Logged
Naci_Sey
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posted 08 May 2006 12:53 AM      Profile for Naci_Sey   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by M. Spector:
People have to do more than just dream.

Yes they do, and people in my immediate acquaintance are doing the best they can, urged on by their dreams.

You list further up in this thread some of the problems you see with tax shifting, and you propose that replacing capitalism with a different system would be preferable. What steps are you taking, or do you think are necessary, to make this happen and what system would be the new one?


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abnormal
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posted 08 May 2006 08:30 AM      Profile for abnormal   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Tax shifting on production would have to start with things where production can't easily be shifted from one country to another and then expanded from there as, hopefully, international agreements come into effect.

I can't think of much (anything?) except perhaps raw materials where production can't easily be shifted from country to country. Perhaps something with a huge up front capital investment where it will take years and hundreds of millions or even billions of dollars to build the infrastructure that's needed for manufacturing? However, I can envision governments that are desparate for jobs and foreign exchange pitching in to help so even that wouldn't be much of an issue.

A potentially unwanted side effect would be to push this type of manufacturing, whatever it may be, to low wage domiciles - it's happening already and this would only speed it up. Ditto surtaxes - if the manufacturer can reduce production costs somewhat surtaxes will hurt the consumer less.

With respect to international agreements, there are enough third world countries that want companies to relocate there that it won't happen. Even if they were to sign on I can envision the application of "environmental taxes" or whatever you want to call them combined with tax rebates elsewhere - note that those rebates wouldn't even have to apply to corporate profits per se - could be a break on import duties on raw materials, could be a reduction in payroll tax, etc.


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M. Spector
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posted 08 May 2006 09:55 AM      Profile for M. Spector   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
I know enough about economics to know that putting money in people's pockets or taking money out of them is a very indirect and inefficient way of regulating people's behaviour, as compared with, say, passsing strict environmental regulations and making sure there is adequate political will and funding to enforce them, or nationalizing the oil companies and operating them on a non-profit, environmentally sound basis, to name just two alternatives.

The best way to discourage someone from doing something is to make it illegal and to be prepared to back it up with force if necessary.

quote:
Originally posted by Adam T:
M Spector, I hate to be so blunt, and to come across as so arrogant, but I have to say it's clear you have absolutely no understanding of economics or economic concepts.

From: One millihelen: The amount of beauty required to launch one ship. | Registered: Feb 2005  |  IP: Logged
2 ponies
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posted 08 May 2006 02:36 PM      Profile for 2 ponies   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
I have to say that I'm inclined to agree with Adam T on this forum's "issue." Judging from experience, providing financial incentives and disincentives is one of the most effective ways to encourage "entities" to do, or not do, something. Implementing legislative "hammers" works in certain situations, but when it comes to areas of personal choice, it often just results in major backlash. Making SUV's illegal, for instance, is a bad idea because it invalidates the individual's choice to drive a gas guzzler. Implement a system whereby I can drive my SUV, but I'll have to pay a lot extra for it; e.g. an annual environmental tax that makes it cost prohibative to drive the darn thing AND redirects money (e.g. the tax) towards reclamation of the effects. Another option may be to legislate the standards that have to be met; such as making SUVs more fuel efficient, and or hybrids, by law. Typically, however, an incremental approach to these sorts of steps is best. Start with "small" financial disincentives, more up to large/significant financial disencentives, then better performance (e.g. decreasd SUV emissions), etc, etc.

You can't just ram something down someone's thoat and not expect a major backlash M. Spector. People have to be convinced and there needs to be buy-in. Laws against murder, for instance, work because the vast majority of us bought into the principle, long-ago, that it's not okay to murder people. Change takes time and requires an implementation plan.


From: Sask | Registered: Nov 2005  |  IP: Logged
M. Spector
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posted 08 May 2006 06:49 PM      Profile for M. Spector   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
The whole idea behind tax shifting is to get people like auto manufacturers to make more fuel efficient vehicles. But if there is a viable "green" technology that can be applied to automobile manufacture that is not being used, the most direct way to get it used is to mandate its use through regulation of (emission and other)standards.

The problem with using tax to control behaviour is that it often doesn't work. Imposing a heavier tax on the manufacture and/or sale of SUV's, for example, is just another way of increasing the price. It's the same tired old theory of the "discipline of the market place" making everything right, thanks to the magical operation of supply and demand. Yawn! We all know that's a crock.

SUV's became popular despite their costing more than economy sedans to purchase and operate. The purchasers were/are simply prepared to pay more in order to have a gas-guzzling SUV. People don't always buy the most economical, let alone the most "green" products. That's only one of a myriad of instances where the market system doesn't work to regulate people's behaviour.

You say you want a system where you are free to drive an SUV, but pay a lot more for it. We have that system now. It means the rich get to pollute and the poor don't (a microcosm of the situation in the world as a whole). How does it make anything better for our planet?

How can you really expect to prevent the destruction of the Earth's ecosystems when you are afraid to "invalidate the individual's choice to drive a gas guzzler"?


From: One millihelen: The amount of beauty required to launch one ship. | Registered: Feb 2005  |  IP: Logged
Adam T
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posted 08 May 2006 06:58 PM      Profile for Adam T     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
With respect to international agreements, there are enough third world countries that want companies to relocate there that it won't happen.

I don't know which third world countries you are referring to, but, in the case of production that is higher on the 'value chain', most of these countries simply don't have the skilled work force to take those jobs.

Obviously if we wanted to take this discussion beyond the theoretical, we'd have to look at a sector by sector case of production that results in negative externalities and look at what options would be available to the specific companies in those sectors if taxes were raised on either the production or the consumption of the specific products they produce.


From: Richmond B.C | Registered: Nov 2003  |  IP: Logged
Adam T
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posted 08 May 2006 07:15 PM      Profile for Adam T     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
The whole idea behind tax shifting is to get people like auto manufacturers to make more fuel efficient vehicles. But if there is a viable "green" technology that can be applied to automobile manufacture that is not being used, the most direct way to get it used is to mandate its use through regulation of (emission and other)standards.

The idea behind tax shifting is that it encourages designers to come up with 'viable green technology' because they would receive a tax credit for doing so and because they would have a market of car manufacturers that would receive tax credits for using the 'viable green technology'.

Of course laws can work in specific cases, and mandates can be extremely effective as well. Nobody, except you, is looking at this as an either or situation.

quote:
It's the same tired old theory of the "discipline of the market place" making everything right, thanks to the magical operation of supply and demand. Yawn! We all know that's a crock.

No, you believe it's a crock. Practically every economist on the left and the right knows that market incentives are one of the most efficient mechanisms for encouraging and discouraging behaviour.

quote:
It means the rich get to pollute and the poor don't (a microcosm of the situation in the world as a whole). How does it make anything better for our planet?

Yes, the rich (and middle class I suppose) would get to pollute. The idea behind tax shifting is that they would pay society full cost for the effects of that polution. This makes far more sense than trying to somehow ban every product that pollutes.

For instance, what are you going to do with oil? You can hardly ban it because society needs the energy produced by the oil. It makes far more sense to say 'yes we need oil, but it's time to start shifting so that within a number of years producers and consumers of oil pay full cost for the harm caused by that oil, and that the revenue generated from that go to developing products that don't cause harm'.

I'm sure you would say though 'lets just ban oil' because absolutists like you have no interest in what happens to the economy.

I note you still haven't given a single specific for your plan for a 'better economy' than the present capitalist model.


From: Richmond B.C | Registered: Nov 2003  |  IP: Logged
Adam T
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posted 08 May 2006 07:31 PM      Profile for Adam T     Send New Private Message      Edit/Delete Post  Reply With Quote 
Since there seems to be some interest to the idea of tax shifting, I looked up some articles that discuss the topic (the interest created an incentive for me to look it up, just another example of market mechanisms at work . Of course, typing 'Sweden tax shifting" into google isn't hard )


Most of these, as you might guess from what I clicked into google are on Sweden's tax shifting
http://tinyurl.com/fu4oh
http://tinyurl.com/fuacn
http://www.sweden.gov.se/sb/d/4173/a/30037
http://tinyurl.com/gj6hw

Wikipedia article: http://tinyurl.com/g88fb

An economists' report to the Canadian finance committee on pricing externalities through the tax system:
http://tinyurl.com/j28l8

From the report
Why it is better to use tax shifting than mandates:
Four Key Advantages
1. Cost Effectiveness
An emission tax system minimizes the social cost of achieving an abatement target. The technical term here is the “equimarginal criterion”. Different polluters face different costs of reducing emissions. Unlike standards, emission charges automatically allocate abatement activity among polluters in such a way
as to minimize the cost to society of the environmental improvement. For industries with wide variations intechnology, age of plant, scale of operations, etc., these savings can be substantial.

2. Dynamic Incentives Under emission charges. Polluters have a strong incentive for continual innovation in pollution control technology. This is not true of standards. In fact, many common forms of emission standardsinadvertently retard the development of new emission control technology. Without innovation andtechnological improvement, the long run cost of environmental protection will be higher than it otherwisewould be. (This is exactly what I said above in regards to the develop of 'viable green technology'. Tax shifting creates an incentive for innovaters to develop such products and for manufacturers to use them.)

3. Revenue Recycling Pollution reduction is a costly activity.
Whether policies take the form of standards or taxes, theyincrease consumer prices and reduce real wages. Some of the increased costs are simply deadweight losses.But some accrue to the polluters themselves in the form of what are called “scarcity rents.” Emission taxescapture these rents and return them to the policy maker. These revenues can be used to reduce other taxes,in order to offset the loss in household real income caused by the emission control policy.Alternately, revenue can be used for implementation incentives. Under this scheme the revenuesare returned to the polluters themselves in the form of a subsidy to, say, output or employment. Whilesuch a revenue recycling rule offers less benefit to society as a whole, it may be the key to winning industryacceptance of an emission tax policy, as was the case with the Swedish tax on NOx emissions.

4. Information
When regulators are setting standards, they need information from industry about the costs ofproposed emission reductions. Under a standards regime, firms have an incentive to overestimate theirabatement costs. But if firms expect an emissions tax policy instead, it can be shown that they have no incentive to exaggerate their abatement costs. In other words, if firms overstate their abatement costs, andthe tax is implemented on the basis of their reports, they will end up worse off than if they had reportedthe truth.In addition, once an emission tax is implemented, the market response to the tax reveals importantinformation which, if the regulator knows how to interpret it, can be used to refine the policy and enhanceits overall efficiency. The market response to standards however does not generate any such information.

[ 08 May 2006: Message edited by: Adam T ]

[ 08 May 2006: Message edited by: Adam T ]


From: Richmond B.C | Registered: Nov 2003  |  IP: Logged
M. Spector
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posted 08 May 2006 07:40 PM      Profile for M. Spector   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Adam T:
...(the interest created an incentive for me to look it up, just another example of market mechanisms at work .
You'll notice, though, that no money changed hands.

From: One millihelen: The amount of beauty required to launch one ship. | Registered: Feb 2005  |  IP: Logged
M. Spector
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posted 08 May 2006 07:42 PM      Profile for M. Spector   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Adam T:
I note you still haven't given a single specific for your plan for a 'better economy' than the present capitalist model.
Are you inviting me to derail this thread into a discussion of post-capitalist societies and economies?

From: One millihelen: The amount of beauty required to launch one ship. | Registered: Feb 2005  |  IP: Logged
Adam T
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posted 08 May 2006 07:49 PM      Profile for Adam T     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Are you inviting me to derail this thread into a discussion of post-capitalist societies and economies?

The topic this section is under is labour and consumption, or essentially economics. So, it would certainly fit into the section.

So, knock yourself out. (my favorite phrase for saying 'go ahead')


From: Richmond B.C | Registered: Nov 2003  |  IP: Logged
Naci_Sey
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posted 08 May 2006 07:58 PM      Profile for Naci_Sey   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Adam T: the rich (and middle class I suppose) would get to pollute. The idea behind tax shifting is that they would pay society full cost for the effects of that polution. This makes far more sense than trying to somehow ban every product that pollutes.

For instance, what are you going to do with oil? You can hardly ban it because society needs the energy produced by the oil. It makes far more sense to say 'yes we need oil, but it's time to start shifting so that within a number of years producers and consumers of oil pay full cost for the harm caused by that oil, and that the revenue generated from that go to developing products that don't cause harm'.



There is an additional factor that goes along with the idea of dis/incentives. That is social pressure.

While the well-to-do may still purchase gas guzzlers and consume more than their fair share of energy in their homes, etc., as more and more people who are less well off respond to tax shifting strategies, they will have less and less regard for those who continue to pollute. The increasing public disapproval could impact the wealthy both at home, in their community, and in their business dealings.


From: BC | Registered: Apr 2006  |  IP: Logged
abnormal
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posted 09 May 2006 07:22 AM      Profile for abnormal   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
as more and more people who are less well off respond to tax shifting strategies, they will have less and less regard for those who continue to pollute

I don't see this. If the change in behaviour were somehow the result of a shift in attitudes, i.e., the behavior in question is "bad", then I can see it. If the change in behavior is the result of cost, i.e., the behavior in question is simply too expensive for most people, I don't see it happening. At best (worst?) it becomes an example of conspicuous consumption - whether it becomes something that everyone aspires to is another question.


From: far, far away | Registered: Aug 2001  |  IP: Logged
otter
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posted 09 May 2006 05:00 PM      Profile for otter        Edit/Delete Post  Reply With Quote 
Such an idea as tax shifting may very well be an important means of helping to control, or at least alleviate, the excesses of corporate greed.

However, the corporate community controls both the libs and the cons through the funding of these parties and by having complete and full access to our government's decision making process. As for the other parties, the corporate community has them so intimidated and paranoid about never getting elected unless they placate business interests first.

Sweden may well be a leader in this issue, but that is likely because Sweden has a strong and very effective referendum system, whereby the people themselves get to decide what is important, not just the politicans.

Until Canadians are able to gain full control over their own political decision making process we will never see any real, evolutionary changes in the way that both goverment and business dominate the affairs of this country.

direct democracy


From: agent provocateur inc. | Registered: Feb 2006  |  IP: Logged
Farces
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posted 14 May 2006 10:57 PM      Profile for Farces   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
This appraoch places an awful lot of trust in the people who decide what is good for the environment, and what is bad for the environment and exactly how bad.

The initial post raised the example of an SUV versus a hybrid saying that one is good for the environment and one is bad. That is not exactly right -- both vehicles involve environmental damage to some degree. Even if it were a completely battery powered vehicle, instead of a mere hybrid, the electricity generation causes some pollution, most likely (eg, at the power plant). Even if the person used their money on mass transit instead of a vehicle -- that choice also entails some degree of environmental damage. Even more astonishly, even if the person spends their money on walking shoes -- even that responsible choice entails some degree of environmental damage (because the person's energy comes from food and food usually takes petrochemicals and cleanish water to grow.

Now I think that we all agree that SUV is the least responsible choice and walking the most responsible, with the hybrid and the train/bus passenger being somewhere in between. The question for the taxing authority is: can these authorities be trusted to adjudge environmental impacts such that we don't overincentivize an environmental disaster.

Getting back to the example with the hybrid: if the tax incentives are too generous, then people will simply destroy the environment with hybrids, rather than SUVs. People who used to drive SUVs will get three hybrids instead. Some people who used to take the train would get a hybrid instead of train tickets because the hybrid tax incentives are overvalued in this hypothetical. You might have **more** emissions problem than if gov't never got involved in the first place.

Of course, the easy answer is to say that government will evaluate all the alternatives fairly and make sure that everybody, even the bus passengers, may their way as far as the environment goes. I think this answer is too easy.

First, there would be political pressures. I could easily imagine hybrids being overincentivized relative to the bus. Because hybrids have more lobbyists than the bus lines do!

Second, there are limits to what the government can even know about environmental damage. To use a different example, let's say I switch my factory to nuclear power. Is that good or bad for the environment (compared to whatever it is Canadian factories run on now)? Who can say? Nuclear power has big risks that are hard to compare to global warming risks. Turning nuclear power incentives and disincentives into a political tax issue might cloud society's environmental judgment more than it helped. Nuclear power is just one example of a difficult-to-evaluate risk. The tax code would be making these tradeoff with all kinds of different chemicals and emissions, with the eager help of lobbyists, looking at every juncture to shift costs to those who don't lobby.

Don't trust it, myself. This tax shifting can of worms is probably better left unopened.


From: 43°41' N79°38' W | Registered: May 2006  |  IP: Logged
BlawBlaw
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posted 15 May 2006 08:19 PM      Profile for BlawBlaw     Send New Private Message      Edit/Delete Post  Reply With Quote 
You don't need to tax SUVs because gasoline is already heavily taxed, so the owners of gas guzzlers will be paying more taxes.

While people are referring to it as a "shift" there has been some discussions on the right wing about about "matching". In otherwords, tax revenues are matched to government expenditures in some rational way. The problem is that consecutive governments simply toss everything into general revenue, eliminating any connection between taxes and expenditures.

For instance, a portion of the gas tax could go directly to road maintenance and construction. Similarly, alcohol taxes could go to various social services; tobacco taxes to health care.

However, placing dollar figures on environmental factors becomes rather difficult. And there is very little basis to subsidize "green" energy supplies. If it's non-polluting then it has no negative externalities, which is different than saying it has positive externalities.

Setting aside the pollution question for the moment, basic economic theory predicts that when non-renewable resources run out then their price will go up making renewable energy cost-competative.


From: British Columbia | Registered: Jan 2006  |  IP: Logged
abnormal
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posted 15 May 2006 09:35 PM      Profile for abnormal   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
I don't know which third world countries you are referring to, but, in the case of production that is higher on the 'value chain', most of these countries simply don't have the skilled work force to take those jobs.

You want to see them develop it in a hurry?

As countries like India develop a high tech infrastructure you're already starting to see Indian software engineers head home whereas even a few years ago they stayed in North America.

Same thing will start to happen with manufacturing.

Build the plant, fill management/supervisory roles with expats, and hire locals to do the rest. Won't take that long before you have a skilled workforce.

And offshoring doesn't have to be to backwards places. One of the major whitegood manufacturers (Maytag?)actually opened a new plant in Germany where wages are even higher than in the US, let alone Mexico, because the efficiencies of the manufacturing process were such that costs went way down - think 15 man minutes per final assembled washing machine. Not that Germany is an example of someone that would ignore the environment, but just the same, you get surprising results whenever you try to manipulate the economy.


From: far, far away | Registered: Aug 2001  |  IP: Logged
BlawBlaw
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posted 15 May 2006 11:44 PM      Profile for BlawBlaw     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by abnormal:

You want to see them develop it in a hurry?

As countries like India develop a high tech infrastructure you're already starting to see Indian software engineers head home whereas even a few years ago they stayed in North America.


But India had over 170 years of Britsh Imperial rule and British institutions to build the necessary human capital. Unless you can point out other developing nations that have adopted a good chunk of Anglo-Saxon traditions and institutions I don't think you won't get a relatively fast transition to high-tech jobs the way you have in India.


From: British Columbia | Registered: Jan 2006  |  IP: Logged
Adam T
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posted 26 May 2006 08:55 PM      Profile for Adam T     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
This appraoch places an awful lot of trust in the people who decide what is good for the environment, and what is bad for the environment and exactly how bad.

I don't deny that political manipulations could occur with any program. I'm familiar with the Yes Minister episodes where the advice of the hapless policy experts were ignored by their civil service bosses/political in favor of expedient decisions that had more to do with short term political or other advantages. Also, from the real world, I've read books about the Brian Mulroney government that suggested that all economic decisions were made with political interests in mind.

That said, I think you are overestimating the complexity of tax shifting and I think you are underestimating the ability of the tax department civil servants to ensure that any tax shifting policies be based on scientific evidence. I believe there are already many tax policies that use outside experts. For instance, corporate taxation is based on GAAP rules.

I don't think that taxing based on environmental evidence would be THAT hard, and I think much information already exists that would support the decisions.

A simple example would be something like this:
If research exists that suggests that smog causes $20 billion in health care and other costs a year, and the science research suggests that cars cause 10% of that pollution, it wouldn't be hard to calculate that car purchases should be taxed at $2 billion a year to pay for that pollution.

If SUVs are calculated to cause 25% of that pollution, then they would be taxed at $500 million. Breaking it down to the specific amount of tax on each type of SUV again probably wouldn't require very complicated calculations.


From: Richmond B.C | Registered: Nov 2003  |  IP: Logged
Fidel
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posted 26 May 2006 09:02 PM      Profile for Fidel     Send New Private Message      Edit/Delete Post  Reply With Quote 
In 2001, Maurice Strong suggested that Canada should be aiding America in becoming less reliant on our energy exports. Alberta doesn't collect a dime in green taxes from tar sands. I think that would be a good start. With shrewd leftists in government, we could have big oil companies over a barrel instead of bargaining from a prone position with our own stuff.
From: Viva La Revolución | Registered: Apr 2004  |  IP: Logged
Adam T
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posted 26 May 2006 09:11 PM      Profile for Adam T     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
You want to see them develop it in a hurry?

As countries like India develop a high tech infrastructure you're already starting to see Indian software engineers head home whereas even a few years ago they stayed in North America.

Same thing will start to happen with manufacturing.


I think you are underestimating the requirements involved.

I don't want to stereotype so-called 3rd world or developing countries, but I don't think it's a surprise that India developed software engineers instead of other high tech industries.

Thanks to technology, software engineering can be done practically anywhere: it doesn't require transportation to ship the end product and it has relatively low energy requirements.

Transportation and reliable energy are two pieces of infrastructure that aren't always available in many 'developing' countries.

Similarily, I think you are underestimating the complexity in training workeres to work in high tech industries, espeically those higher up the 'value chain'. I would think that in most cases the workers require years of education, it isn't just a matter of the company coming in, scooping up a bunch of people and giving them a month or so of training.


From: Richmond B.C | Registered: Nov 2003  |  IP: Logged
Fidel
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posted 26 May 2006 10:23 PM      Profile for Fidel     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Adam T:
I would think that in most cases the workers require years of education, it isn't just a matter of the company coming in, scooping up a bunch of people and giving them a month or so of training.

Western corporations are helping it happen though when they export technological innovation as well as high tech jobs to Asia. Microsoft is outsourcing various aspects of its operating system development to Indian engineers. China began producing software engineering graduates after 1982 or so. China is preparing to become a serious contender for American and European software development outsourcing jobs. In fact, China is producing over two and a half times the number of engineering graduates as the U.S. right now and are about to build twelve new M.I.T.-style engineering universities. The American's are worried about an engineering gap. IBM and INTEL are doing R&D in China right now. I think this is amazing considering that China was a fourth world nation behind even India in 1949 and far behind Canada and the United States. The average time to pay off a student loan debt in China today is about two years. Here, the kids face average twenty year student loan debt sentences as a reward for pursuing higher education.

ETA: Asia was once the largest economy in the world. It's a matter of time before it will be again.

[ 26 May 2006: Message edited by: Fidel ]


From: Viva La Revolución | Registered: Apr 2004  |  IP: Logged
Adam T
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posted 26 May 2006 10:30 PM      Profile for Adam T     Send New Private Message      Edit/Delete Post  Reply With Quote 
Yes, well the rest of the world needs jobs too.
From: Richmond B.C | Registered: Nov 2003  |  IP: Logged
Fidel
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posted 26 May 2006 10:41 PM      Profile for Fidel     Send New Private Message      Edit/Delete Post  Reply With Quote 
Canada is a notorious under-performer. We should be listed in the top ten most competitive economies. But we are being held back by political conservatives and liberals who are obsessed with controlling inflation and paying down national debt loaded onto us from the 1980's forward and which they themselves are directly responsible for. We're a frozen Puerto Rico with natural wealth being carted off to the states at firesale prices every day.

Canada's approach seems to be to allow foreign takeovers of our corporations and natural resources. And foreign-based companies don't want to do R&D in Canada anymore than they want to declare profits here to be taxed. Publicly-funded R&D and innovation is what made the U.S. a booming high tech economy after world war two. Ottawa would rather we ship logs and energy to the states so we can eyeball a rising GDP as if all Canadian's benefitting from it.

[ 26 May 2006: Message edited by: Fidel ]


From: Viva La Revolución | Registered: Apr 2004  |  IP: Logged
otter
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posted 27 May 2006 10:58 AM      Profile for otter        Edit/Delete Post  Reply With Quote 
But Fidel, it's the American Way don't you know?
From: agent provocateur inc. | Registered: Feb 2006  |  IP: Logged
abnormal
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posted 27 May 2006 12:00 PM      Profile for abnormal   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
it isn't just a matter of the company coming in, scooping up a bunch of people and giving them a month or so of training

True - however one thing that we are seeing is people "going home" to work. A few years ago Indian programmers and software engineers that were trained in the US and Canada (and even those that were trained in India) to a large extent had to come to North America to do cutting edge work. Now, not only does the Indian trained engineer not have to come to North America, the American trained engineer can go back to India and work. Not that they all do but from what I've read it's a growing trend.

From: far, far away | Registered: Aug 2001  |  IP: Logged

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