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Taxes, Carbon and otherwise

July 29, 2007

My last two questions to Tyler Cowen were about the effects that a Carbon Tax or a tax cut might have on prices. Tyler agrees that a Carbon Tax would push almost all prices upwards in the short run, but that in the long run such a tax could have beneficial fallouts for the development of alternative technologies. On the “tax cut” front he said it would depend on how the tax cut is funded. If it is funded with loose monetary policy then certainly prices would go up, if it is funded with fiscal discipline then the results are inconclusive.

I don’t share the same optimism for the Carbon Tax, but this is just a feeling, I don’t have any proof one way or the other. More generally though, if it’s agreed that society finds an equilibrium with regard to government policies, wouldn’t it be wise to oppose ANY changes to the tax code whatsoever? Isn’t this continual tinkering with tax laws, and continual sprinkling of tax-breaks, exasperating? Wouldn’t it be better if the tax laws of this country were settled once and for all in the constitution and any new changes could only be made with constitutional amendments? We could then adjust to it and go on with our business….

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