I don’t actually favor the “citizen dividend” side of a carbon tax

The carbon tax idea makes perfect sense to me, and I have endorsed the proposal for some time, but why return the revenue to citizens in the form of dividends?  It strikes me as economists thinking they know what makes good politics, something which economists are rarely good at.  Arguably it makes the policy seem less important, and mainly about the dividend, in a slightly cynical, Chavez-like sort of way.  Furthermore, it tries to make a carbon tax a free lunch, which it is not, no matter how great the longer-term gains.  I don’t believe in economists tricking people, even though I will admit tricking people can be useful.  The tricking is somebody else’s job!  Finally, if the carbon tax is revenue-neutral, just sending money to everyone (in what proportions?) doesn’t give them anything in return as measured by real resources.  Maybe it would give Jay Powell a slight headache, however, since he and others at the Fed would have to decide whether and how to do an offset, or not.

We economists are in any case not in charge, so let’s push for what is actually best.  I would suggest using the revenue to either help solve the problem at hand (climate change, or whatever connected problems might be relevant), or simply to pay down the debt.


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