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How Gillard could improve the carbon tax

March 23, 2011 11 comments

The debate about the carbon tax is so passionate and divisive that a compromise is almost certainly out of the question. But that doesn’t mean we can’t consider the thought experiment. I am on the public record as being against Gillard’s carbon tax, but after Ross Garnaut came out recently talking about linking the carbon tax with other tax cuts I started thinking about what else could be done to make the carbon tax “less bad”. The following are the demands I would put to the government if they wanted me to consider supporting their new tax…

1. The first requirement, and non-negotiable for me, is that the tax cuts must be at least as large as the new carbon tax. I believe that the federal government is already too big, and I am very strongly opposed to any policy that would further increase the size of government. If the proponents of a carbon tax really believe that the policy is vitally important then they should be willing to offer large tax cuts, even if that means they need to cut government spending.

2. My second requirement, which is also a game breaker, is that the carbon tax must not later convert into an emissions trading system (ETS). While both will have a cost to the economy, in my opinion an ETS is worse, and is likely to be an ever-growing bureaucratic and regulatory nightmare. If there must be a price on carbon dioxide, then it should remain at a low, simple, and predictable tax.

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