Pigouvian Redistribution

There has been a lot of support lately for the ideas that Arthur Cecil Pigou (1877-1959) set forth in his book The Economics of Welfare. Pigou held the chair of political economy at Cambridge (succeeding Alfred Marshall) and was the leading neoclassical economist of his day. The book is an attempt to provide a theoretical basis for government intervention to improve social conditions. His introduction of Pigouvian taxes is part of that effort.

I wonder if the Pigou fans who have been so enthusiastic about Pigouvian taxes will also endorse other ideas from his book. For example, here's part of his argument for redistributing income from the rich to the poor. It could, perhaps, serve as the Pigouvian Redistribution Club's manifesto:

[I]t is evident that any transference of income from a relatively rich man to a relatively poor man of similar temperament, since it enables more intense wants, to be satisfied at the expense of less intense wants, must increase the aggregate sum of satisfaction. The old "law of diminishing utility" thus leads securely to the proposition: Any cause which increases the absolute share of real income in the hands of the poor, provided that it does not lead to a contraction in the size of the national dividend from any point of view, will, in general, increase economic welfare.

This conclusion is further fortified by another consideration. Mill wrote: "Men do not desire to be rich, but to be richer than other men. The avaricious or covetous man would find little or no satisfaction in the possesion of any amount of wealth, if he were the poorest amongst all his neighbours or fellow-countrymen." More elaborately, Signor Rignano writes: "As for the needs which vanity creates, they can be satisfied equally well by a small as by a large expenditure of energy. ... In reality a man's desire to appear 'worth' double what another man is worth, that is to say, to possess goods (jewels, clothes, horses, parks, luxuries, houses, etc.) twice as valuable as those possessed by another man, is satisfied just as fully, if the first has ten things and the second five, as it would be if the first had a hundred and the second fifty."

Now the part played by comparative, as distinguished from absolute, income is likely to be small for incomes that only suffice to provide the necesaries and primary comforts of life, but to be large with large incomes. In other words, a larger proportion of the satisfaction yielded by the incomes of rich people comes from their relative, rather than from their absolute, amount. This part of it will not be destroyed if the incomes of all rich people are diminished together. The loss of economic welfare suffered by the rich when command over resources is transferred from them to the poor will, therefore, be substantially smaller relatively to the gain of economic welfare to the poor than a consideration of the law of diminishing utility taken by itself suggests.

Comments

[realpc]

He's right about social comparison, and most poor Americans today are rich by earlier standards. The big complaints now are modern health care and higher education, which have never been available to all.

But the idea that redistribution is good has at least one problem: feeling superior to your friends and neighors is only one of the motivations for acquiring wealth. The other, probably more powerful, motivation is to feel safe.

We often define a rich person as someone who does not have to work (they might work, but not because they need the income). Being rich, in this sense, gives a person freedom from many problems that the non-rich worry about. It also gives them free time, and it could be argued that time is the most valuable resource of all.

When progressives decide to take from the rich and give to the poor they make a couple of serious mistakes. I can understand taking from the very rich to give to the very poor, but I cannot understand taking from the somewhat rich to give to the somewhat poor. The former is simple compassion, while the latter is a violation of the somewhat rich person's natural desire for safety and free time. The latter policy seriously damages the somewhat rich person only to make the somewhat poor person feel better about him/herself.

Failure to differentiate between very rich and somewhat rich, and very poor and somewhat poor is one the the most serious failures of progressive ideology today. And the above post is a justification of that failure.

Here is a typical example of what I mean by a somewhat rich person: He or she has worked hard for decades and has been financially responsible, with the goal of retiring before old age. Do you really want to penalize this person and prevent them reaching their reasonable goal, just so someone else can have more unnecessary things?

Now you might answer that everyone should have freedom from financial worries and the luxury of free time, before old age. No, that is unreasonable and impossible for any government to guarantee. Those are things that individuals can plan for and work towards. The government should not try to provide them for everyone, and it also should not put up obstacles.

[spencer]

very good Mark.

[slink]

realpc
your views
are quite a wonderful subject for careful study

first question what's your own precise social -wealth- and relative job position now

odddly enough making a striver worker harder and longer may create more "absolute national income "
vide phelps neo head tax

btw
rawls vail of ignorance seems not to be operating here

[save_the_rustbelt]

Modern Pigovian ala Mankiw seem to only support regressive taxation for social engineering purposes.

Rob from the poor to give to the rich, Sheriff of Bushinham.

[ken melvin]

He’s hardly a sound basis for developing an economic model for these times. Or those.

[kharris]

The political (power) aspect of the Pigovian argument is missing from Pigou (as far as I know) and here as well. That is not a blameworthy ommission. I just think the political aspect is worth menion. If having more than the next guy makes us feel better, we are likely to use our wealth to assure our ability to hold on to wealth. The way to do this in the old days (the old days are still with us in many places) is to put goons on the payroll and crush or rob from anybody who seems to be doing well. In modern times, we use wealth to manipulate political outcomes. Tax cuts for the rich and weakened pensions and health care benefits for the rest is not a new idea. It is just an idea that is hard to fight once it shift the balance of power far enough in favor of the rich.

[evagrius]

I like the irony present here. Greg Mankiw and others advocate a gas tax ( and carbon tax), to increase auto efficiency and reduce pollution. That's fine. It's done in Europe and Canada with no real problem because...in a lot of areas, especially urban, there's a functional public transportation system. The result is, theoretically, less individual traffic and more use of public transportation reducing pollution overall.
A gas tax by itself would do little to reduce pollution etc; if there is no other transportation alternative. This is especially true for the poor.
Why no one states this is a mystery to me- or am I being unsophisticated?

As for the quote of Pigou- it's a great examination of the moral virtues and vices involved in material possesions and wealth.

The Japanese saying of "one bowl, one tatami" is quite applicable here. It's a typical saying from a typical traditional society- those values still hold partial say in Japan where conspicuous consumption is frowned on, especially the rather gaudy type, ( it's one thing to spend a large sum on a recognized art work, ( ceramic bowls, scrolls, tea rooms, ) and another on expensive toys, ( Maseretis etc;)).

The lacuna Pigou does not deal with is not wealthy people's need for safety but for power. Reduce their wealth and their power is reduced. A Bill Gates can only eat so much and take up so much sleeping space- however, he can, on a whim, change millions of people's lives.

It's power that the very wealthy crave, not safety and not even luxury. How many times have there been articles about very wealthy people being personally frugal? Frugal they may be, but try taking away their power.

[Dirk van Dijk]

The one tax that does hit the seriously rich much mor than the somewhat rich is the inheretance tax, particularly if there is a fairly good sized exempt base amount (say $4-5 million).

[Bruce Webb]

"The other, probably more powerful, motivation is to feel safe."

Minimizing taxes on wealth: the brand new safety net. Irony is not dead, not at all. It is built into every Real PC money can buy.

"a violation of the somewhat rich person's natural desire for safety and free time"

Rich indeed, but perhaps not in the way intended. Translated it says "I don't care if the compensation scheme was scewed by pricing power disconnected with actual contribution to productivity, you are keeping me from my tee time".

Son "I got mine" is despite 23 years of Reaganism not an economic argument.

[Adam]

Talking about helping the poor and then mentioning that men dont desire to be rich, but only richer than their peers seems a bit of a inappropriate. Income redistribution should not be going to people who drive Hondas but want Mercedes. I can't argue with the logic of marginal benefit, and thats why we should be redistributing wealth to the third world where it is most needed.

[evagrius]

Adam; The problem is that the Third World exists right in the U.S. Just take a drive down some areas to see, ( well, dont really unless you want to get shot).

The Indian Reservations are Third World, the Texas/ Mexico border is pretty much Third World, ( Brownsville is the "poorest" city in the U.S.), there's still Appalachia and the Ozarks, there's areas where people are barely hanging on in the Midwest.

Go to California, where you'll see the huge, huge, dichotomy between the "rich" and the "poor". See the McMansions in developments practically cheek by jowl to virtual shantytowns. Check out the huge agri-business farms in California, Florida etc; where farm workers live in shacks.

It's not just a matter of driving a Honda vs. a Mercedes. It's a matter of decent housing, food, clothing and education.

The dichotomy is getting larger but it's been well-screened by the media. After all, poor people don't exist.

[Dave Iverson]

"I wonder if the Pigou fans who have been so enthusiastic about Pigouvian taxes will also endorse other ideas from his book. For example, here's part of his argument for redistributing income from the rich to the poor. ..."

Good question, Mark. Now we await Greg's response. It would seem prudent to accompany said gas tax increase with an income tax break for the poor. But that would defeat one (maybe two) of the stated benefits of the gas tax: having money to fund future underfunded (unfunded?) mandates like social security and getting people to drive less. Maybe the poor don't drive as much as others, so I said "one (maybe two)." On my daily bus rides into work I see mainly working poor people riding buses. But there are beginning to be more people like me who take advantage of employer funded bus rides, and as a bonus feel less guilty about the waste we incur when we drive our cars solo. In any case, nice followup to Mankiw and others (like me) who are now members of the Pigou club.

Mostly I joined the club cause, as others have said, with no apparent energy policy here in the US, we do need to do something. Don't we? Otherwise what incentives exist to explore alternative energy sources? Still, we ought not to impose whatever policies we devise via regressive taxation.

[Ken Houghton]

If Mankiw is still an economistI hope he is, though Nelson Algren appliesthen he already knows that skewed income distribution leads directly to market inefficiencies.

It comes down to whether he cares about all policies that exacerbate market inefficiencies, or just those that don't affect him.

[Bupa]

evagrius: "A gas tax by itself would do little to reduce pollution etc; if there is no other transportation alternative."

This is not true! A gas tax would coax Americans to make choices that Europeans already make. Americans would choose more fuel efficient cars and choose to drive fewer miles. Most automakers would react by investing R&D to produce even more fuel efficient cars as European and Japanese car makers are already doing.

The way to deal with the regressive nature of the tax is through good old fashion redistribution and investment in public transportation. Again some examples from Europe might come to mind.

Don't be so dismissive of the gas tax. Few policies will more quickly reduce America’s carbon footprint. People in Bangladesh will thank America for finally taking a serious step towards fighting global warming.

[Richard]

"A gas tax by itself would do little to reduce pollution etc; if there is no other transportation alternative. This is especially true for the poor.
Why no one states this is a mystery to me- or am I being unsophisticated?"

No, but I would suggest that inexpensive rural land plus gasoline taxes used to build roads (but not their maintanence) creates subsidies for non-urban areas. If one is to move to an energy policy that is less wasteful of oil and gas and focuses more on nuclear and the electric grid, one comes face-to-face with the necessity of urban development and the waste embedded in sprawl. Since roads and buildings represent an enormous fixed cost, any energy policy must eventually look at land use.

[realpc]

"Minimizing taxes on wealth: the brand new safety net. Irony is not dead, not at all. It is built into every Real PC money can buy."

No Bruce it is not ironic at all. People do try to get their own safety nets and it's hard to see what you think is wrong with that. Should the government have a monopoly on creating safety? What's wrong with letting people save and build up financial security? Why do you want us all to be wards of the state?

And like all typical progressives, you refuse to define "wealthy." Where should we draw the line between rich and poor? Is a rich person anyone who can afford to cut back their work hours a little and enjoy some free time? Is it anyone who sleeps well at night because they have saved and planned for possible setbacks? Do you want to make sure no one has any control over their own future?

[evagrius]

I'm not dismissing a gas tax, just merely pointing out that it will fall on those in the U.S. least able to afford it because there's no public transportation worth anything outside a few major metropolitan areas.

It's this fact that bothers me.

Combine a gas tax with the building up of public transportation and you've got something. Combine it even further with some policy discouraging urban sprawl and you may have a rational policy.

But until that's looked at in a deep way, I don't see the usefulness of a gas tax. I know it has to "start" somewhere but how about the public transportation network before the tax?

( Question; how many reading this use public transportation? I've read one person who does. Any others? I lived in an area with good public transportation but only within city limits. Once outside, it was terrible and my job was outside the city).

[Lee A. Arnold]

Mark, the argument amounts, in no particular order:

(1) As above, the logic of marginal utility demonstrates that redistribution increases the general social welfare. (Pigou)

(2) Falling birth rates, routinization of R&D for innovation, and reduction of the bourgeoisie to wage-earning, all tend to decrease the socioeconomic importance of the capital-owning class (but of course not the function of capital itself,) while the entrepreneurs somewhat lose their "mystic glamour." (Joseph Schumpeter, CAPITALISM, SOCIALISM, AND DEMOCRACY, 1942)

(3) At the level of taxation of the wealthiest people in the developed countries, we can change the tax rates a few percentage points either way, and it does not have much effect on long-term growth. (Real results.)

(4) In the developed countries historically, the net national costs of government social spending is close to zero. (Tabulated historical evidence across countries in Peter H. Lindert, GROWING PUBLIC, Cambridge 2004; wherein the evidence also suggests that the best mix is: flatter taxes + universal coverage by social programs.)

(5) "Institutions," -- e.g. beliefs, goals, rules, laws, government, contracts, enforcement -- since prehistoric times serve to reduce individual uncertainty and promote common objectives, while a large body of evidence in experimental economics shows that individuals do not always free-ride in institutions, and that altruistic behavior is a very large and unexplained residual. (Douglass C. North, INSTITUTIONS, INSTITUTIONAL CHANGE, AND ECONOMIC PERFORMANCE, Cambridge 1990)

(6) Public discussion about economic policy, at least in the United States, is ALWAYS referred to, and considered "proved" or "disproved," by the evidence of the current state of the "business cycle," (and the immediate fatness of people's wallets,) and NOT referred to long-term variations in the standard of living, which are always impalpable, and tend to be of lesser marginal importance to people who already HAVE a very high standard of living.

(7) At least three separate trends are hitting simultaneously, with fierce and often very confused discussions of their causes and dispositions: (a) Accelerating labor-dislocation (job loss, and career & income volatilities) in the new round of globalization; (b) Widening gap in the always-unequal distribution of income, whether caused by a new era of technological innovation, labor dislocation, or other causes; (c) Environmental limits are becoming apparent, despite some successful past attempts at mitigation -- with the globalization of ecosystems losses, plus the simultaneous and worldwide increases in pollution by synthetic chemicals, and distortions of the total biogeochemical cycles of carbon and nitrogen.

----Where this all goes is beyond me, though I think we're going to have to put it all together. I am struck again and again, how appropriate the discussions were in the 19th-century and very early 20th-century economists and social thinkers, as they saw more clearly the beginning effects of the "system of perfect liberty" on society, and even on nature. Since then, perhaps as the aftermath of the two World Wars plus our technological hubris, our whole intellectual discussion seems to be atomized, sidetracked, and going downhill.

[Bupa]

evagrius (Question; how many reading this use public transportation? I've read one person who does. Any others? I lived in an area with good public transportation but only within city limits. Once outside, it was terrible and my job was outside the city).

I use public transport. Now you have two. But even in Europe which has much better public transport, most people drive.

Ask yourself as you commute what is the average fuel efficiency of the cars your fellow commuters are driving. Ask yourself how far off the charts Americans are in their use of fossil fuels per capita (transport is a big chunk of that, but not all). Ask yourself what is the average fuel efficiency of commuters in Japan, Sweden, Hungary, and the Czech Republic. All of these countries pay a lot more for a gallon of gas largely because of higher gas taxes. The last two I’ve listed have average incomes of about $10,000 and pay about $5.00 a gallon for gas. Think of that before complaining too loudly about the regressive nature of the tax. Folks in Bangladesh will be very happy if the bulk of their country doesn’t sink below sea level. Glutinous Americans must change their habits if they are to reduce their oversized carbon footprint.

Apologies for digressing from the Pigouvian Redistribution Club. Sensible redistribution policies would be an important dose of sugar to make any Pigouvian gas tax go down. People can be full members of both clubs. I doubt we would get Mankiw to join both, but we would get Stiglitz and probably even Rogofff.

[evagrius]

Bupa;

Good points but you do point out that there are places with good public transportation. It's an alternative of choice that most in the U.S. don't have.

Besides, I think the U.S.'s fixation on autos, nearing atavism , is so influential in the world that if the U.S. began to adopt or adapt to public transportation, others would follow suit.

Of course, the way to do it would be to make public transportation prohibitely expensive, something only the very rich could afford. Imagine, they could ride in luxury, with waiters serving drinks etc; Kinda like what trains used to be.

But don't hold your breath.:)

[Bupa]

Public transportation is important but let's face it, it not much of a solution for rural areas. Public transportation is not likely to be an option in Wyoming.

In the mean time the lack of public transport should not be an excuse to drive gas guzzling vehicles. A gas tax would provide a big incentive to trade in those 10 year old pickup trucks and SUV for ten year old Toyottas and Hondas. Don't buy that new jeep, buy a Prius instead. The second order effects will also be large as car companies compete for business in an America sensitive to fuel efficiency.

[evagrius]

You're right about Wyoming but even there there could be public transport. There could be tax incentives to buy smaller cars and, who the hell needs a pickup if you don't use it everyday? What's with guys wearing cowboy boots who don't ride horses, etc?

[koen]

From the post: "Any cause which increases the absolute share of real income in the hands of the poor, provided that it does not lead to a contraction in the size of the national dividend from any point of view, will, in general, increase economic welfare."

This is true. However, any opponent to the Pigou redistribution club would quickly remark that redistribution has a negative effect on the size of the economy.

Add to that the problems of effectively targeting the poor (and the rich for that matter) to make all of this an academic matter.

Having said that, I personally think progressive taxes to fund a government run safety net for all (i.e. rich and poor) is a good thing.

BTW: I take the bus to work.

[Ethan Jacobs]

Evagrius: Chalk up another one who rides the subway to work.

I think we can agree that the modern skyscraper would not function effeciently without free vertical transportation in the form of elevators. Of course these things are not really "free" they just aren't paid for by the people who ride them. [We don't charge people a penny every time they step on an escalator or a nickle every time they step into an elevator.] These modes of transportation are paid for by the businesses who rent the spaces on floors which make the transportation necessary. I suppose they are also paid for by the kiosk in the lobby, but then it wouldn't have as much business in a 4 story building as it has in the 40 story building so some payment from the kiosk seem fair. The businesses, in turn, pass the expense on to their customers in the form of the prices they charge for their goods or services. So in the end the rider who is a customer and not just an empolyee is, in fact, paying for his ride.

I now wonder if a modern city can function effeciently without horizontal transportation, and if not, why don't we make that transportation free to the people who ride it? Let the public transit system be paid for from real estate taxes on the properties that benefit from the existence of the public horizontal transportation. Most public transit systems have some subsidies from general or real estate taxes, but why stop with "some"? Why not make the systems free to those who ride them?

Chicago already does this to some extent -- but to promote a different benefit. On New Year's Eve and New Year's Day, all CTA rides cost one penny each.

Do any of you readers know of research on whether such free/low cost transit would increase ridership and decrease private auto traffic?

[reason]

Where's James Kroeger. That was his cue he missed.

[Richard]

evagrius: I walk to work. I gave up having a car earlier this year.

I am not insensitive to the fact that rural livlihoods are strongly impacted by fuel prices. Most of my family now lives in Eastern New Mexico and West Texas - not places known for its mass transit options.

But compared to a century ago, housing patterns have sprawled in an uncontrolled fashion. The era of cheap energy did propel a great deal of growth and offered the poor and the wealthy much in the way of flexibility, but as energy becomes more and more dear that pattern of land usage becomes more expensive.

I don't disagree that more money should be spent for mass transit, and not just for large cities. And I'd like to see taxes on energy usage increase, but in a gradual and systemic fashion, say 1% per year. Nothing like the knowledge of predictable pain to give people incentives to change.

[adam]

ethan-

the cta is barely solvent financially as it is now. there is no way they could make it free. funding it through property taxes may seem simple but but then you run into the problem of how much money they need to operate. this is already quite dicey because they go to the state to get money and play all sorts of games in their funding requests.

recently, when told they need to cut costs and become more efficient they responded by announcing a host of money losing bus routes that they were going to cut.

were these bus routes really losing money or were the routes they chose the ones that would get the maximum people angry with the funding cuts?

from personal experience i'd be highly doubtful the #156 loses money. it runs only on weekdays, only during the day, is standing rooom only and serves a lot of young high-rise condo owners and renters that do not own cars.

the legislative committee that oversees the cta subsidy threatened to send auditors to verify that these routes were money losers and the cta folded their cards and settled for a lower budget.

this type of self-interested bureaucratic behavior is why it will never be "free".

[evagrius]

Richard and all walkers or public transportation users;

Thank you. It's nice to see that there are some who do "walk the walk", ( to use a horrible cliche- sorry).

I agree with you. Any imposition of new taxes should be gradual but firmly fixed so that the public knows in advance that it ain't gonna get easier.

That gradual tax should still be linked to some thinking/ action about public transportation. Whatever happened to Amtrak?

[anne]

We cannot do this and we cannot do that and we surely won't do this or that no matter how much we must, but of course we can and should do lots. How many years was it that wonderful public colleges in New York and California were free of tuition, yes, free? How many years? Texas? North Carolina? I had not thought about free or lower cost public transportation, and I do not now have an opinion, but we afford what we wish and right now we are merrily affording a $2 trillion dollar war that I am told by ever merry American Enterprisers is really quite affordable. So, enough about affordability.

[adam]

amtrak does run the commuter trains to and from the suburbs in chicago.

[realpc]

Anne, I do think everything should be free. I would like it. Except for my work of course -- I should be paid for that.

[anne]

No; there are many things that should not be free and there are many ways to pay for things and to be paid for what we do. Interestingly enough though free public education is an institution that did ever so much to make America all that America at its best is. Get it? Now, free public education is still paid for but still free. Get it?

But, of course, we evidently get having a free war while troubling over having free public education. And, as for free health care, do not bother to ask, for that must be French and you know avbout those French. Oh, and I get paid and I get paid well, awfully well and I have all sorts of protections to make sure I keep on getting paid well. But, to be personal, I am rather pleased to pay in turn for all the free public education possible. I even pay for the free war in and occupation of Iraq, which bothers me no end. Get it?

[Jon Fernquest]

Ethan Jacobs: "Do any of you readers know of research on whether such free/low cost transit would increase ridership and decrease private auto traffic?"

I know where to look to find the answer:

http://urbantransportasia.blogspot.com/

The most extensive, low cost system in the world is/was no doubt the Seoul Subway:

http://en.wikipedia.org/wiki/Seoul_Metropolitan_Subway

The city couldn't function without it. This is the sort of externality reducing public good that is not possible without a strong state.

[Finch]

Reply to Public-transportation arguement:

I count myself lucky enough to live in one of the very few small suburban areas of the country actually populous enough to merit a decently-sized economy, albeit a shrinking one, and a small enough geographical footprint to actually make public transportation perhaps worthwhile; yet to take public transportation would cost $2.50 a day round-trip, compared to $1.10 in gasoline. Add to this the inconvenience of having to walk almost 2 miles in potentially inclement weather, not being able to run errands or go anywhere besides home immediately after work, and there's really not so much of a decision anymore.

Conclusion: in order for public transportation to be truly popular among the general populace, you not only have to make it convenient, cheap, and safe (try asking a mother of 3 elementary-age soccer players to give up her minivan in favor of ANYTHING), but you must also force people to completely overhaul their lives. Good luck.

[Jon Fernquest]

Ethan Jacobs: "Do any of you readers know of research on whether such free/low cost transit would increase ridership and decrease private auto traffic?"

Bus-subway integration in Seoul: "Benefits claimed so far include impressive increases in bus speeds (especially on the BRT corridors), reductions in bus-related accidents, and an upward trend in bus passenger numbers (about 700,000 extra per day without a drop in subway use).

Operating subsidies for the bus system have risen however. But the authors argue that this should be set against reduced expenditure on metro/subway extensions with their associated debt servicing and operating deficits."
http://urbantransportasia.blogspot.com/2006/02/success-story-seouls-2004-public.html

[anne]

Interesting comments and references on public transportation, about which I know so little but will read on a little. Thank you.

[Richard]

Finch: Good points. In urban areas, bus service is often every ten to fifteen minutes during daylight hours (more at rush hour, less in the evening). If mass transit is to be used, it has to be convenient.

One small bone I'd pick with you is on costs of car ownership. Insurance costs plus the fixed cost of the vehicle itself plus maintanence can easily top $500 per month, and even a used car carefully maintained will cost more than a dollar a day. When so adjusted, the cost of car ownership doesn't look so attractive.

Increasingly, businesses like zipcar and flexcar are making what is effectively co-op car ownership available in the larger cities. I'm hopeful within a few years that they will become available in densely populated smaller cities and towns as well. For many people owning a car is useful only for commuting to work and/or household errands; if those issues could be addressed, perhaps fewer people would own cars.

[Finch]

Reply to actual topic:

I'm consistently struck by the parallels in our society with the pre-union world of the early 1900s: While increased technology and health standards have arguably increased the quality of living for all classes, there still exists a very strong pattern of the privileged few (our politicians and overpaid CEOs) sitting at the top the ladder, while those at the bottom are subjected to rising health-care, energy, and education costs, higher insurance rates across the board, rising average debt, insane housing costs, etc.

While I agree that those who acquire wealth should be able to enjoy the possession thereof, I have to question the means of said acquisition to a certain extent, especially where corporate profits are involved. Would it be so difficult to require firms with certain operating budgets and/or net profits to provide a certain level of health care to all of their employees, not merely the middle-management and above? Or require that publicly-held companies return a certain percentage of net profits to all employees in the form of dividend-producing stock, in addition to regular salary?

After all, a close examination of the most recent BEA numbers show a 1.4% increase in corporate profits, and a .04 percent increase in personal disposable income for 2nd quarter 2006. Something's out of whack.

[Peter Schaeffer]

Finch,

All valid points. However, you missed the biggest parallel with the early 1900s. Open Borders and mass immigration. Is it coincedence that America looks more and more like the early 20th century? I think not. Notice how eagerly the Wall Street Journal promotes uncontrolled immigration (and preventing immigrants from voting). Do they under self interest? I think so.

[Bruce Webb]

Real PC "And like all typical progressives, you refuse to define "wealthy." "

Well I don't remember being asked for a definition. A good working definition would be anyone earning over the Social Security maximum, now about $97,000. Effectively they get an immediate 6.2% cut in their top marginal rate on ever dollar over the cap.

Or you could simply define it as the top decile.

Or you could set up a strawman:
"Is a rich person anyone who can afford to cut back their work hours a little and enjoy some free time? Is it anyone who sleeps well at night because they have saved and planned for possible setbacks? Do you want to make sure no one has any control over their own future?"

Good grief. What progressive ever defined it like that? And again, apparently without conscious irony, you imply that the poor don't deserve leisure. No one suggests that just because you have six months of income, substantial equity and a defined benefit contribution we liberals are coming foryou. Set it up, burn it down, repeat. It is still a strawman cariacture of progressive taxation.

[gordon]

Comments about the carbon efficiency of cars being improved by a high carbon tax are interesting given that as far as I know the most substantial recent improvement in carbon efficiency of cars in the US arose from straightforward regulation - the so-called CAFE standard.

Why do we find it so difficult to take the role of regulation seriously?

[anne]

Gordon:

"Comments about the carbon efficiency of cars being improved by a high carbon tax are interesting given that as far as I know the most substantial recent improvement in carbon efficiency of cars in the US arose from straightforward regulation - the so-called CAFE standard.

"Why do we find it so difficult to take the role of regulation seriously?"

Why oh why are we not able to understand our own history?

[evagrius]

finch;

Don't you know that Mark Hanna is Karl Rove's ideal political strategist.

Also, Grover Norquist idolizes the McKinley era of American politics.

Your assessment is quite correct.

[Peter Schaeffer]

Evagrius,

Grover... My (least) favorite guy. Predictably an Open Borders nutcase. Check out the links between Grover and terrorists in the United States over in Wikipedia.

[Bupa]

Gordon,
Many high and middle income countries in the world have higher gas taxes than the U.S. Many also have higher CAFE standards. All drive more fuel efficient cars than Americans do.

You're creating a false choice. America can do both. On the CAFE side, they can start by getting rid of the "light truck category" in their CAFE standards. But don't whine about a gas tax. Folks in Budapest and Prague have average incomes of about $10,000 per year yet pay $5.00 a gallon for gas. The gas tax affects both the supply and demand side -- unlike the CAFE standards which only effect the supply side.

The children of Bangladesh will thank you.

[evagrius]

Peter Schaeffer;

I have. Norquist the the "right-wing" equivalent, in many ways, to such "left-wing" fanatics as Pol Pot, Stalin, Mao, etc;
Thank goodness he never's been able to obtain the power he craves, at least for now.

[Richard]

I too am all in favor of CAFE. But Bupa is right -- you want to impact the demand side as well.

Legacy vehicles will continue to exist well after higher standards take effect. For the owner who goes on a once-a-week grocery run, it's not so important that they purchase a more efficient vehicle; for the courier who puts substantial mileage on a car, you want an economic incentive to save as much as possible. The inequitable nature of the regressive tax impacts could be dampened somewhat by returning money as an earned income credit or lowering taxes on the lowest marginal tax rate.

[Jenna's Bush]

The one tax that does hit the seriously rich much mor than the somewhat rich is the inheretance tax

Which is why the Republicans have been so keen to do away with it.

[gordon]

I certainly wouldn't argue against the "do both" position with regard to carbon taxes and regulation. My concern is that we always forget to do the regulation part.

And as far as carbon taxes themselves are concerned, I note that many advocates of carbon taxes also advocate compensating reductions in some other tax. Thus Stiglitz: "It would be good if the world could agree to use the proceeds [of carbon taxes] to finance the range of global public goods that are so important for making globalization work better—for instance, for promoting health, research, and development. But that may be too ambitious. Alternatively, each country could keep its own revenues and use them to replace taxes on capital and labor: it makes much more sense to tax “bads” (pollution, like greenhouse gas emissions) than to tax “goods,” like work and saving. …Hence, overall economic efficiency would be increased by this proposal.”

Nordhaus also: “If the carbon constraints are imposed through taxes that are then rebated in taxes that have approximately the same marginal deadweight loss as the carbon taxes, then the overall efficiency loss from taxation will be unchanged.”

I think that advocates of carbon taxes would do everyone a favour if they got specific about what other taxes should be reduced and by how much. And maybe it would be a good thing to agree that support for carbon taxes depends on such corresponding reductions elsewhere. Otherwise we are left with an extra, regressive tax which, whatever its impact on carbon efficiency, would certainly aggravate inequality.