Discussion > Duck recognition for dummies
BB I reckon you're pulling our collective chains, nobody can be that dumb that they see a tax on energy use as the same as any other tax. Let's take a few examples, say VAT. If the government raises VAT everything subject to VAT will increase, which may mean that people will cut back on consumption of certain goods. Increasing income tax will have a similar effect, which is why Mike Jackson's point that al taxes, necessary as they may be, are "loathsome" in that their overall effect is to take money from people and give it to bureaucrats. A carbon tax increases the price of energy, it's knock on effects are monumental in scale. Everything from food to iPads uses energy in it's production, so the tax increases the cost if production fir everything. The goal of course is to reduce the use of energy, about as suicidal a strategy as banning DDT, but then theGreens don't care about that it's there goal to destroy our industrialized societies.
geronimo
Chris M, I have no connection with Oz, its politics or its energy supply. The web page I quoted is easy to find, even by a non-activist, and contains 5 or 6 references to each year, 2011 and 2010, and my numbers were 2011 prices from the table in the middle (yes, industrial). That makes it about a year old; the ABARES chart is from 2009 but only you mentioned that chart; maybe the chart is a sore point with Oz 'sceptics'. EU prices are high for many reasons, only one of which is renewables policy - I suspect the same is true (of rises) in Oz.
Geronimo, say you were running a company. Would you prefer a tax on energy, one of your inputs that you can try to minimize by efficiency improvements, or a blanket tax on your profits (corporation tax) and a tax on employing people (another input that you try to minimize)? An energy tax acts just like a price change and, as you say, is transmitted throughout the economy. But it distorts activity less than other taxes because its effect is so broad. I would guess it is an ideal tax from an economist's point of view (where broad action is preferable). Energy price changes are common enough - do they cause so much fuss?
BitBucket
The further back up the chain a tax is levied the worse the effect downstream since it affects everything throughout the production process. Yes, you can make savings — maybe — but in essence energy is one of your fixed costs in the same way that any raw material is and any savings you can make are very limited.
In theory high energy tax could act as an incentive to find a less energy intensive way of making your widgets but that's a long-term solution and you may not have time before the bailiffs turn up!
It is also for the same reason a blunt instrument since it affects the costs of all production equally and restricts government's ability to differentiate between those products which it sees as essentials (where the price needs to remain within reach of all), desirables (which will normally be within the reach of most people's income but, not being essential, are candidates for revenue raising) and luxuries (which are what the word says and are prime candidates for revenue raising).
Taxation is an essential tool of government, but so also is the welfare of the people — at least in civilised countries — and it is a function of government to protect the vulnerable. Up-stream taxation (and most especially levies on energy) severely limits government's abilities in that sphere.
Look at the figures for fuel poverty, a situation that no-one ought to find themselves in.
Mike Jackson
OK BB, you are now sounding more reasonable, to give you your due. But your basic premise is still wrong imho. Check out the difference in electricity price inflation in Australia in your favoured table vs. the very low rate of rise in the US and Canada, all similar countries in terms of their vast fossil fuel energy reserves. By artificially inflating our energy costs with a carbon tax and other 'green' policies, we are cruelling our economy and throwing away a competitive advantage. What rational nation would do that? if you have an explanation that makes any sense BB, I'm listening.
Chris M
Mr Bucket
Surely you have some kind of budget or basic idea of how much you earn and therefore how much you can spend? Most people do even if it is on the back of a fag packet. In business if you are running a tight ship and just keeping your head above water, it must be pretty upsetting to see some Welsh witch take a chunk out of your budget to "save the planet", particularly when the planet is doing fine ty.
Dung
Mike, your compassion is clear and I believe it is sincere. But if an electorate collectively requires that government spends $1trillion each year then $1 trillion (around half of UK GDP) must be extracted from the economy by taxation. Even if half of the economy were considered luxury or non-essential, extracting half of GDP from that part through tax is clearly not possible. So taxes will have to effect everything - don't argue with that, it is plain to see.
Economists seem to regard broadly based taxes as most efficient - i.e. those hitting everyone with no distorting special cases and exemptions. An energy tax does that. It also tends to hit the rich more than the poor.
Chris, has Australia's competitive advantage really been in cheap electricity up until now? Resource exports seem a more likely strength.
BitBucket
Sep 6, 2012 at 9:10 AM BitBucket
...government spends $1trillion each year then $1 trillion (around half of UK GDP) must be extracted from the economy by taxation.
If that were true it would be great - sort of. But a significant fraction of govt spending is done on its credit card. Hence the illusion of prosperity.
Martin A
Mike, your compassion is clear and I believe it is sincere.Well, thank you, BitBucket! Since I've been "banging on" about fuel poverty and the inanity of wind farms for years, I think I can probably be considered "sincere".
Never mind how much government needs to raise, you do not (if you have any sense) tax essentials, at least more than you need to.
A tax on raw materials is a tax on the poor, doubly so in the case of energy since it is also something that individuals use and pay for directly. In the final analysis all tax is paid by the consumer since it is only people that have money. For that reason taxation needs to be kept as close as possible to the final stage of economic activity so that those that foot the bill can see precisely how and government has the maximum flexibility to protect the vulnerable and incentivise where appropriate.
So:
- tax sales of non-essentials giving the consumer at least the theoretical choice as to whether or not to buy;
- tax income so that those who are able contribute in due proportion to the national revenue;
- tax profits to the extent necessary but not so much as to damage economic activity.
My original point, however, is that all taxation is loathsome that is levied on the basis of a false prospectus. Since the government is currently engaged in levying punitive taxation on one of the basic essentials of civilised life, to wit energy, in the misbegotten belief that it is saving the planet or some other such crap this particular levy is doubly loathsome.
As to what economists believe ... give me a break!
And energy taxes do not hit the richest hardest; they hit the poorest hardest, for the very simple reason that (a) there is a basic level of energy consumption below which it is dangerous to fall, and (b) the tax, levied as you suggest, increases the cost of everything.
Energy taxes are regressive.
Mike Jackson
So which do you think is worse:
- taxing the physical resources companies use and the pollution they generate?
- taxing the labour companies use?
Either way, companies will use less (resources or labour). Tax is about choices. Choose.
BitBucket
False dichotomy question there. Mike clearly favours taxing at the end of the process. Voters should pay tax directly. Corporations should pay on profit, but they can if multi-national shift that to favourable regimes so we make them pay on sales. VAT, in fact. Consumers who don't pay income taxes can't duck VAT. It is pretty important to have visible taxes, not taxes acting as friction in every part of the machine disguising inefficiency and driving up costs everywhere. And taxes on 'sin' tend to come to rely on sin, they don't act to diminish it.
rhoda
BitBucket
I'm afraid you continue to miss the point.
You don't tax either of those things specifically. You tax to raise the necessary revenue to carry on the business of government in a way which meets the aspirations of, and is acceptable to, the general population — insofar as tax can ever be acceptable.
Government's function is to govern not, in spite of appearances to the contrary, to use taxation as a punitive measure.
Your question is meaningless as it stands (and reminiscent of "have you stopped beating your wife?") since you appear to assume that tax should be about restricting business's use of resources and that it is a proper function of government to influence business in that way. It isn't.
I shouldn't have to re-state it but obviously I do. The further "downstream" you levy taxes the better since they are more transparent and more flexible. To tax business inputs adds costs all the way down the line and is inevitably regressive.
By increasing the cost of a good to the consumer you are then obliged to use part of that tax receipt to pay higher benefits to those who are in need of state support than would otherwise be the case. You might call it Gordon Brown Syndrome. Tax everybody and then give large amounts back again at additional administrative costs to people some of whom don't need it and others of whom wouldn't need it if you hadn't taken it in the first place.
The pollution argument is even more fallacious. We all generate "pollution". We pay either through the tax system or independently of it to dispose of waste or to clean up the environment. Businesses that breach air quality and other similar standards are fined or charged for the excess pollution that they create but since "pollution" is an inevitable by-product of commercial activity (or arguably any human activity) to speak of taxation levied with the specific aim of reducing it makes no economic or fiscal sense.
rhoda — Just noticed your post. Taxes on sin relying on the continued existence of sin (smoking?) is a good analogy.
Mike Jackson
The best way to increase the tax take is to grow the economy, it is also the most painless way. If you tax energy or in anyway increase the cost of doing business then you shrink the economy.
Dung
I guess we are going round in circles but I'll give my suggestion another spin, just for the fun :-)
If you want to extract $1trillion from a $2trillion economy it is going to effect everything, wherever the tax is applied. You seem to have faith that governments and bureaucrats can fine tune 1001 end-user taxes in such a way as to get some vaguely defined equitable/desirable social and economic outcome. I don't believe they can and I would be surprised if any advocate of small-government would believe that either.
BitBucket
...affect .. ?
Martin A
An advocate of small government would not accept that government spending 50% plus of GDP. Such an advocate would identify the problem as spending rather than a failure to think up enough taxes. He would favour fewer well-defined taxes at the consumer end. In a tyranny he would want concealed, painless taxes. He would not put a tax on, say, imported tea which would provide a visible focus for discontent. In a proper democracy where the people have to be constrained from voting themselves favours he would wish tax to be visible and to affect all voters. We do live in a democracy, not a tyranny, don't we?
rhoda
...affect .. ?
Sep 6, 2012 at 2:48 PM | Martin A>>>>
Exactly Martin!
I had thought the unworldly adolescent nonsense from BitBucket was merely a tongue in cheek wind up in order to make fun at the expense of BH contributors.
That grammatical error now makes me think that older, more experienced contributors here are actually in danger of making themselves seem silly by taking the childish ramblings of an 'actual' adolescent seriously.
I doubt if BitBucket has ever paid a penny in tax in all his/her life and is fast taking on the thread clogging mantle left behind by BBD.
RKS
"If you want to extract $1trillion from a $2trillion economy it is going to effect everything, wherever the tax is applied. You seem to have faith that governments and bureaucrats can fine tune 1001 end-user taxes in such a way as to get some vaguely defined equitable/desirable social and economic outcome."
I have no faith whatsoever that "governments and bureaucrats" can spend 50% of GDP responsibly or equitably. I see nothing desirable at all about that level of taxation. What I do see is an entirely self serving combination of welfare and bureaucrat dependency, plus an irresistable need for self appointed busy bodies to control others.
Hector Pascal
I am with you Hector ^.^
Dung
I never cease to be amazed — and irritated — at the extent to which people will invent straw men simply to keep an argument going.
Let's start with "1001 end-user taxes", shall we?
Primo - Nobody has mentioned 1001 taxes, end-user or otherwise.
Secundo - Nobody has suggested "fine-tuning" 1001 taxes, end-user or otherwise.
So why not try concentrating on the matter in hand instead of trying to obfuscate?
The statement that "If you want to extract $1trillion from a $2trillion economy it is going to effect (sic)everything" is open to so many interpretations that without further explanation it is meaningless.
Since I've explained three times the reason why taxing energy is (at least arguably) the most unfair way to raise revenue, whether it is the way economists (which one or ones) choose or not, I don't propose to go through it again though you could perhaps explain which part of "taxes should be levied as far down the chain as possible in order to allow the maximum flexibility" you are having trouble with.
Mike Jackson
Mike you are just quibbling with my grammar and my rhetorical window dressing (fine tuning 1001 taxes etc) in order to avoid addressing the substance of what I said. Your "taxes should be levied as far down the chain as possible in order to allow the maximum flexibility" sounds like high economic principle but is just your opinion. I disagree with it and would be surprised if it has ever been expressed in a context other than in trying to justify ideological opposition to an energy tax (maybe I'm wrong - so surprise me). I've read the Economist for a long time and can't remember such a principle ever being proposed.
Hector, I agree with you, but the electorate probably doesn't (try getting elected with a proposal to cut spending by tens of percent). Given that restriction, one has to face the realities of how to raise the necessary money (or you borrow some of it, as Martin suggests). Rhoda, same applies - deal with the reality of the actual tax level, not some longed-for ideal (ps. sounds like you are reading from Mike's copy book).
BitBucket
Sep 6, 2012 at 7:53 PM | Mike Jackson>>>
Whether I've agreed with you or not, I've always respected your posts Mike, but stop wasting time and energy with this character. He/She/It is simply taking the pi** by deliberately winding you,and others up with thread clogging nonsense. Just as BBD used to before he completely went overboard.
RKS
Sage advice.
The BBD effect was strange - over quite a short period of time, after years of routinely quoting SkS or s.o.d., BBD seemed to go into some kind of hyperactive angry hysteria.
Martin A
"Geronimo, say you were running a company. Would you prefer a tax on energy, one of your inputs that you can try to minimize by efficiency improvements, or a blanket tax on your profits (corporation tax) and a tax on employing people (another input that you try to minimize)?t"
First off you're sounding like Polly Toynbee, you appear to believe that the money belongs to the government and that taxation, isn't taking it off us, but that the part we're not taxed is giving it to us. There is no need for a carbon tax it's not being put in place to raise funds it's being put in place to dampen energy use, ane will affect everyone - already our energy prices are around 11% higher than they would be without the tax. It won't stop us using energy, and if you had any nous at all you'd know that if you have a business of any sort then an energy tax will increase all the costs of your business, from locally made goods, used in the business to manufacturing costs to transport. Added to this will be a concomitant pressure on wages from employees who see the cost of energy, food, clothing (made in the UK) and transportation.
geronimo
Marint A. "The BBD effect was strange - over quite a short period of time, after years of routinely quoting SkS or s.o.d., BBD seemed to go into some kind of hyperactive angry hysteria."
As I recollect BBD actually started out by pretending to be a sceptic and then having a Damascene moment. For a while I, because I didn't follow up on his references, I thought he was incredibly well read, or might have been a climate scientist himself. Slow as I am, it gradually dawned on me that even a climate scientist wouldn't have the breadth of interests shown by BBD's references, and that a layman would be in an even worse position. So I followed up a couple of citations and both led me to SkS and the penny dropped (as i said I'm terribly slow), he was parrotting SkS and hadn't actually read any of the myriad papers he'd cited.
Odd cove really. I missed him after the first ban, but as you said he'd gone into some sort of hyperactive angry hysteria, and we're better off without him. Or is it a her?
geronimo
BB, from the time of your post I strongly suspect that you are in fact an Australian Gillard/Greens apologist. I am not at work today and so can reply promptly to your straw man argument, although DNFTT may well be a wiser course. Since when is 2009 a year ago? You also quote the industrial prices, whereas residential prices (which may include small business) are much higher.
The distortion of prices due to irrational EU renewable energy policy is very obvious in the ABARES bar chart. Note that the USA, where gas from fracking is plentiful and cheap, is way down the list. The gap is likely to have widened further in the three subsequent years. But don't let facts get in the way of your ideology, Mr Bucket.