Fiscal Cliff negotiators: tax alcohol; tax tobacco; tax carbon; eliminate “carried interest.”
1. A phased-in, but ever-rising, greenhouse gas tax or carbon tax. (Raises revenue, protects the planet.)
2. Tripling the federal alcohol tax. (Raises about $15B/yr. in revenue, prevents violent crime – including about 600 homicides per year – and auto accidents, protects health, prevents birth defects.)
3. Tripling the federal cigarette tax, with half the proceeds from each state going back to that state if its local tobacco taxes are at least half the national average. (Raises about $8B/yr. in federal revenue and gives about the same to the states, protects health, discourages interstate smuggling.)
4. Treating “carried interest” as ordinary income rather than capital gains. It’s only a couple of billion bucks a year, but let’s make the Republicans vote either for or against continuing to give Mitt Romney and his ilk big gifts.
What frustrates me no end is that the first three are obviously efficiency-increasing as well as revenue-raising, and yet I have no confidence that they will even be on the table.
Update In response to comments:
1. Taxes on driving need to cover four aspects of cost: contribution to global warming, conventional air pollution, congestion, and roadbed wear & tear. (You might add a fifth: contribution to energy imports and thus to the global importance of the Middle East.) A greenhouse-gas tax, or more narrowly a carbon tax, covers only global warming. Conventional pollution should be covered by an annual registration fee based on the product of a vector of pollutants-per-mile times total miles driven. Congestion should discouraged by a per-minute or per-mile charge for being on crowded roadways at crowded hours (or parking in congested places), collected by a GPS-enabled Smartpass. Roadbed wear-and-tear goes roughly as miles driven times the square of the vehicle weight; again, that could be an annual fee.
2. High tobacco taxes produce illicit markets, and the need for enforcement. Not the end of the world. The cost of enforcement is covered many times over by the revenue collected, with the health benefits as a free extra. Tripling the federal tobacco tax would add about 20% to the price of a beer: not enough to generate much of a black market, but enough to somewhat suppress drinking by heavy drinkers and those without much disposable income, including many teenagers.