What’s not to like about Obama’s “energy rebate”?
4th August 2008
Megan McArdle explains why it’s a pointless sham.
Any Pigovian Tax on energy is going to make those with lower incomes suffer the most, because those are the people who use the most energy relative to their incomes. To the extent that we aim at making the tax distributively fair, we will make it ineffective, at which point we might as well just roll the thing into the income tax structure and forget about taxing energy.
As currently structured, then, the Obama plan seems unlikely to induce much change in relative prices, supply, or demand. Mostly, what we’ll achieve is creating an expensive new administrative burden. This will be a very expensive tax, in terms of the amount of administrative overhead and deadweight loss we endure for each dollar raised or ton of carbon kept out of the atmosphere.