Another look at the carbon tax

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Today in The Age business section I have an op-ed arguing in favour of a revenue-neutral carbon tax.

This issue has sparked debate among Australian libertarians. One group has insisted that the government should do nothing and we should not even talk about the different sorts of bad policy that politicians might introduce. The other group recognises that the government is going to do something about the perceived problems of climate change and want offer a “less bad” way forward.

My “first principle” position on tax is that there should be no tax. However, when I put on my pragmatic hat I do get involved in tax debates — about the relative merits of income v consumption tax, flat tax v progressive tax, high v low tax free threshold, efficient v inefficient taxes, and the relative merits of different taxes.

Some radicals criticise the pragmatic approach as “selling out”. Some pragmatists criticise the radical approach as wacky or irrelevant. I think both are important.

It’s necessary to know where you want to go and have a dream about the political system we want to see. My dream is anarchy, though anything close to that would be good too. But it is also necessary to recognise the realities of the current system and offer realistic solutions to the issues of the day.

With education I would prefer no government involvement. However, given the current political situation I argue for vouchers. Likewise, with climate change I would prefer no government involvement. However, given the current political situation I argue for a revenue-neutral carbon tax. In both situations, the pragmatic option is better than the current mess. We should not let the perfect become the enemy of the good.