TYPES OF TAXES.

Over at TaxVox, Howard Gleckman makes one of my favorite points:

Don’t expect carbon taxes to both dramatically reduce greenhouse gases and serve as a cash cow for government. They might succeed at one or the other, but not both....Government can always slash consumption by raising taxes so much that the product becomes unaffordable. But it rarely does so. Instead, it often boosts these levies just high enough to generate lots of tax revenue without discouraging too many people from buying the evil weed or the daemon rum. After all, if people really stopped consuming, the tax well would dry up.

This is the problem when people talk about replacing, say, payroll taxes with a carbon tax. If you want that carbon tax to fund Medicare and Social Security, as payroll taxes do, then you have to tax carbon at a rate that ensures stable, large returns. Alternately, if you want to tax carbon at a rate high enough that we stop emitting so much carbon, then your tax base is, by design, going to rapidly dry up, and Medicare and Social Security will no longer have funding.In general, there are two types of taxes: taxes that fund things, and taxes that stop people from doing things. Taxes that fund things cannot be taxes that stop people from doing things, as if people stop doing the thing, there will be nothing to tax.