Planet Gore

A Tax on Red States

Lord knows I bow to no-one in my respect for Ken Green and his colleagues at AEI. Nor am I one to dismiss out of hand anything that could replace the evils of income tax. Yet I have been concerned for a while that although people have analyzed up and down the effect of a revenue-neutral carbon tax on different income levels, they have not properly taken into account the geographical distribution effect.
So I’ve been conducting my own research on this over the past couple of days. It’s not ready for prime time yet, but the early results suggest that a RNCT shifts a significant tax burden away from the service-dominated coasts onto the industrial heartland in a way that acts as a substantial penalty on those states.  The dislocation effects are likely to be massive and perhaps ruinous.
It’s a tax on Red States.  New York, for instance, could be almost $400 million better off. Texas, on the other hand, could be $6 billion worse off.  As I said, these numbers are preliminary, but they look sound to me at this time. If those are warts, Ken, they go well beyond the Cromwellian.

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