Josh Barro of Bloomberg View has a post on five good taxes:
They are “good” for one of two reasons: they are hard to avoid, and therefore do little to distort economic behavior; or they distort behavior in ways that make the economy more efficient. Either way, these taxes are excellent ways to finance the government, and we should raise them as a part of tax reforms that reduce deficits and cut other taxes.
The first is a consumption tax, the virtues of which are a perennial theme in this space. The second is a property tax, which I also consider sorely underrated:
In practice, property taxes appear to be the least economically damaging of the major categories of taxes collected, less than sales tax, personal income tax or corporate income tax.
Josh explains how property taxes can be made more progressive in their impact, e.g.:
The main reason property taxes can be regressive in practice is how their proceeds are spent: Instead of going into a statewide pool, they get plowed into high-quality services in the jurisdictions where a lot of tax is collected.
But that problem can be fixed. One way is to impose a statewide property tax, as in New Hampshire, so that residents of low-income jurisdictions share in the tax proceeds from high-value property. Another option, used in many states, is to use the state income tax to plug holes in the budgets of municipalities where the property tax base is weak. Homestead exemptions (fixed shares of property value that are excluded from tax) can also increase progressivity.
The third is a gasoline tax. Josh emphasizes the fact that gasoline purchasers are not very sensitive to price, and that its longer-term behavioral effects are generally positive. I would add that increased gasoline taxes might have significant public health benefits. As MIT economist Christopher Knittel recently observed,
The transportation sector accounts for 67 percent of carbon monoxide emissions, 45 percent of nitrogen oxide (NOx) emissions, and 8 percent of particulate matter emissions. These pollutants lead to health problems ranging from respiratory problems to cardiac arrest. Decreases in traffic, another likely consequence of a gasoline tax — as well as congestion pricing and performance parking — have been found to reduce infant mortality.
Josh’s fourth tax is a carbon tax. I am skeptical of the virtues of a national carbon tax, particularly because it might simply facilitate the offshoring of carbon-intensive activities. There is a somewhat stronger case for a global carbon tax, but (a) I don’t think it would be politically practicable and (b) I’d worry that the growth-dampening effects would outweigh the potential benefits.
Finally, Josh writes in praise of “sin” taxes, including alcohol taxes. A modest increase in the tax on alcohol could have impressive public health benefits, as political scientist Mark Kleiman argued in a 2007 essay for The American Interest:
The average excise tax (Federal plus state) on a can of beer is about a dime. The average damage done by that can of beer to people other than its drinker is closer to a dollar. Those costs consist mostly of crimes, accidents and the health care costs redistributed through insurance—and the one-dollar figure doesn’t count the costs to the families and friends of drinkers.
Of course, not all drinks are created equal; a dollar per can would be too high a tax on the great majority of drinkers whose drinking does no harm, and too low on the dangerous minority. But in the words of an old Chivas Regal advertisement, “If the extra money matters to you, you’re drinking too much.”
One suspects that the revenue gain from such a tax increase would be modest, but it would be vastly preferable to raise revenue via an excise tax on alcohol than via an income tax.