Belgium’s Al Gore Tax
You can’t make this stuff up: Belgium has named a tax after Al Gore.
WSJ has the details behind their subscription wall. National Center for Policy Analysis provides a helpful summary:
- Gore was invoked in proposing a new "environmentally friendly" tax on packages that would penalize users of aluminum or plastic and provide incentives to switch to paper or cardboard, whose production releases less CO2 into the atmosphere.
- The details have yet to be worked out, but the idea is for milk sold in, say, a plastic bottle to cost more than milk sold in a cardboard container.
- Also in the works are tax breaks for car pollution filters and deductions for energy-efficient investors.
To be sure, this Belgian scheme to save the planet also raises a bundle for the politicians to spend:
- Roughly $750 million (€600 million) is the estimated revenue per year from the new "Gore tax."
- A government spokesman says that the revenue will make up for what it expects to lose from planned reductions in social taxes, which are some of the highest in Europe.
Tip: Hotline On Call
If the Belgians want to raise money from taxes, all they have to do is tax beer consumption.
The barely concealed mockery of a Pigouvian tax is quite telling from a self-identified libertarian. As suspected all along, you guys don’t _really_ care about externalities and whatnot, do you?
M1EK: I mostly just find the idea of naming a tax after Al Gore amusing.
On the merits, I very seldom like taxes being used for something other than straight revenue generation. If plastic bottles legitimately cost society more than alternative storage devices in terms of government spending, then there’s a rationale for taxing them more to recoup that. Otherwise, not so much.
M1EK, could you translate your comments into English for the more dim-witted among us? Your comment sounds like the adult voice on Peanuts cartoons to me: “Bwah bwah bwah bwabwah.” I can tell you’re talking, but it sounds like a foreign language to me.
That’s the whole rationale of so-called environmental taxes. It costs more to process certain types of waste, yet we have no pricing mechanism to address the discrepancies in processing.
In the US, for instance, much of our groundwater contamination comes from agricultural and fuel runoff. Groundwater must be treated before it can be consumed. The costs of the cleaning are normally borne by consumers of water not the sources of contamination.
It appears that the moniker ‘gore Tax’ actually came from an opposition MP who was mocking it rather the Government of Belgium naming the tax……
A legacy at last!
A pigouvian tax is basically a tax on (negative) externalities. That is, all of the costs associated with the product are not borne by the manufacture and hence not reflected in the price. The end result is you get too much production and a social sub-optimal outcome. The tax, in theory, will ensure that the price reflects these “external costs” and return things to their optimal allocation of resources.
Now, some externalities are also beneficial, and if we allow taxes to take on “negative” values–or more commonly a subsidy–then you have a way to make sure that all externalities are accounted for in the price and that we have an economy wide optimal allocation of resources.
Now that is the theory. There are a number of problems with this, namely that since these costs and benefits are external it is hard to measure them. Further, since it is unlikely that all external effects are being accounted for it is not clear that if we go from N externalities to N-k that we are “better off”. In fact, the Theory of the Second Best1 argues that we can’t make such an assertion.
There are other problems with pigouvian taxes, but this comment is already long and pedantic enough. I just wanted to highlight another problem with M1EK’s position: his overbearing arrogance in speaking for everybody that posts on OTB, and all the commenters. Pigouvian taxes have their uses, when justified. Is this the case with the “Gore Tax” in Belgium? I don’t know, this is the firt I’ve heard of it.
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1The theory of the Second Best is that the first best solution–e.g. where we have a menu of pigouvian taxes that correct for all externalities–is unattainable, so we go with what is “second best”–i.e. attainable.
On the plus side, plastic is made partially from petroleum products. By reducing demand for plastic, the demand for oil is reduced which brings down the cost of gas. Or the cost of plastic, I am not sure which. LOL
It did not occur to me, on reading M1EK’s comment, that he was attempting to speak for anyone but himself.
I did mention that it was obvious that the author was barely concealing their disdain for this tax – which is not logically consistent with the position that one should attempt to manage externalities via less draconian schemes like pigouvian taxes and/or cap/trade rather than direct regulation so the market can best ‘solve’ these kinds of problems.
As for Steve’s offensive rejoinder – give me a break. The arrogance is obvious, and it’s not coming from here. He exhibits two typical self-identified libertarian dodges of the environmental problem: “you have to exactly account for the exact cost of the externality before you can charge ANYTHING for it”, which basically means you could never do it; and “what about the positive externalities” which is just laughable.
Tano,
I emphasized the relevant part indicating that M1EK was indeed writing in excessively general terms.
This is a such an intellectually dishonest response.
1. By pointing to the problem with pigouvian taxes that doesn’t mean that they can’t be useful at times.
2. I never, anywhere, said that we have to measure an externality exactly prior to taking measures to correct the problems caused by externalities. M1EK is making a strawman argument on this point.
No, what this shows is that you are acting like a complete idiot. You are acting like a complete idiot because I didn’t bring up positive externalities to argue that they counter-balance negative externalities. My point was to show that, at least in theory, the pigouvian taxes can address both positive and negative externalities by allowing taxes to be either positive or negative (subsidies).
Now, if you think that positive externalities are stupid, then fine why don’t we just revoke all federal, state and local spending on things like vaccinations and other preventatives. I mean it is clearly isn’t the case that if a large segment of the population is not going to get a disease, then you have far fewer people actually spreading the disease as well. Then there are things like network externalities as well. So yeah, what a laughable concept that is.
Oh and of course, lets ignore the fact that cap-and-trade are an alternative to pigouvian taxes that, ideally, accomplish the samething as pigouvian taxes, but also do so by bringing the costs into the cost function of the firm.
And lastly there are the whole issue of the implications of the Coase thoerem. If property rights are well defined, people act rationally, and transactions costs are sufficiently low, then a pigouvian tax is not necessary.
Now, considering the M1EK seems to jump to conclusions unwarranted by what I’ve written, let me point out that things like the Coase thoerem do not mean that pigouvian taxes are always unneccessary.