Imagine a tax proposal so unusual that it turns traditional political alliances inside out: a tax hike on fossil fuels that Democrats, unions, and green groups oppose, while the Western States Petroleum Association remains neutral—even though the levy is aimed at its products! Such a proposal, you’d think, could only be the product of a diabolical mind. Sort of: the plan’s author, Yoram Bauman, is known as the “stand-up economist.” When he’s not teaching at the University of Washington, Bauman travels the country doing economics-based comedy. An example: “Microeconomists are economists who are wrong about specific things. Macroeconomists are economists who are wrong about things in general.”
Still, Bauman is deadly serious (sort of) about Washington State Initiative 732, which will appear on the ballot this November, thanks to the efforts of a group that he helped assemble. If it passes, it will impose a carbon tax on fossil fuels in Washington but reduce general taxes by about the same amount. It’s designed to cut consumption of carbon-based fuels in a revenue-neutral way without putting any additional financial burden on state residents. Behind the proposal is Bauman’s notion that our current approach to taxation doesn’t make sense. We tax things that we want more of, like profits and income, and wind up getting less of those things because taxation tends to make them scarcer. Instead, we should tax things that we want less of—and, for Bauman, that means taxing fossil fuels to reduce greenhouse emissions.
From a traditional economics perspective, Initiative 732 isn’t outrageous at all. The early-twentieth-century English economist Arthur Pigou argued that the actions of individuals and firms sometimes impose costs on society—such as the sale of alcoholic beverages, which required employing more cops to deal with the resultant disorder. That cost, in Pigou’s mind, justifies an extra government levy on alcohol, an example of what’s come to be known as a Pigovian tax.
It’s from a political perspective that Bauman’s proposal is causing a stir, exposing previously unknown fault lines. Most assume that the environment is the primary concern of groups like the Sierra Club, but many green advocates oppose the Bauman tax because of its revenue-neutral character.
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