Obenski column: Why stick to the tax devils we know?

Carbon tax is widely accepted as part answer to climate change — there is no need to debate it.

It would be more practical to tax carbon at the source rather than the smokestack. It’s easier to measure solids or pipelines than mixed gasses escaping into in the atmosphere. Any 10-year-old can count railroad cars. We can put well output oil or natural gas through a meter. Forget cap and trade, the problem is global and the pollutants do not respect borders. Carbon tax could reduce our dependence on plastics and their environmental.

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There are many problems that can be mitigated with money. The current favorite is universal medical care. The estimate is $20 or $30 trillion over 10 years. So, say $3 trillion a year divided over 330 million Americans.

That is roughly $10,000 per year per person if distributed evenly. If distributed over income however the top 1% that earn more than the bottom 50% would pay at least half, so we are down to $5,000 per person per year.

The reality is nobody knows how much it would cost. We do know that the current fee for service arrangement is extremely inefficient wasting as much as 40% in insurance overhead and the government already spends a lot that may be misdirected on health care issues.

Medicare for all sounds like a simple solution to an intractable problem. Unfortunately, the idea is fundamentally flawed because Medicare is fundamentally flawed. Medicare is not a universal health care system like in civilized countries. It’s just another insurance company pasted over our fundamentally flawed sickness-care-for-profit system. It does have the apparent virtue of being nonprofit because it’s government owned.

The only way to find the true cost is to try it out. That is scary, but then what we have right now is scary too, only we are used to it. We tend to stick with the devil we know, even though many live in fear of catastrophic medical cost.

Where would the unknown funding come from?

A lot of taxes are not progressive, they are actually regressive in that those with the least wealth, pay a higher proportion. Many fees are flat. Everyone pays the same whether its catastrophic or inconvenient. A speeding ticket in America costs the same dollars whether the offender is broke, or filthy rich. What if it was based on time, income, or the value of the vehicle? Many license fees are the same dollar cost regardless of the value to the recipient, or based on a linear relationship where the benefit is geometric.

Income tax is supposed to be progressive, but the higher brackets come with privileges, aka, loopholes.

What if instead of brackets with incentives to cheat and stay in a lower bracket, the progression was a mathematical curve like an exponent greater than one? Loopholes are harder to find and eliminate, but perhaps the IRS could identify those privileges that have a small number of beneficiaries and are probably the result of unfair influence.

Capital gains are taxed at a lower rate to encourage investment. We certainly want to encourage investment in new capacity or new service, but unfortunately much of capital gain is from speculation, not investment. A distinction is needed between investment and speculative gain.

A financial transaction tax based on the value transferred could be somewhat progressive. The rate could be small so it is hardly felt on normal transactions, but when an arbitrageur moves $100 million shares from here to there to gain an advantage of a dollar a share, 1% would be significant; — even more progressive if the rate had an exponent greater than 1. Such transactions benefit no one but the manipulator. Most corporations at least provide goods or services to anyone who wants them.

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Carbon tax has the unique advantage of taxing those most able to pay, because they typically consume more of what carbon provides: travel, heat, air conditioning, exotic food, entertainment, imported luxury goods, etc. It might encourage employing more people to save carbon. As with any major change there will need to be adjustments.

Ken Obenski is a forensic engineer, now safety and freedom advocate in South Kona who writes a biweekly column for West Hawaii Today. Send feedback to obenskik@gmail.com.