Alan Mitchell puts a case for a "no regrets" carbon tax (AFR, September 24). He claims two benefits of such a tax: discouragement of excessive energy use and providing revenue to enable reductions in other taxes.
While all taxes result in inefficiencies in production, the tax debate, which occasionally emerges from the fog of Travelgate-type scandals, reminds us that some taxes are less inefficient than others.
The tax mix can certainly be improved, but levying an energy tax, in the absence of a GST, would mean placing an impost on producers, an outcome that GST-style taxes seek to avoid.
Without a GST it would be impossible to design a greenhouse tax which exempted the energy-intensive industries that comprise much of Australia's comparative advantage. In the absence of such an exclusion, the tax would lead to industries relocating to countries without such a tax -- an outcome that would actually increase greenhouse gas emissions.
With regard to the other string of Alan Mitchell's case, while it makes sense to reduce excessive use of anything, Australians are no more profligate in their use of energy than in their use of other goods and services. Consumers are their own best judges of their needs, and history is littered with disasters caused by experts deciding these issues on their behalf.
To be sure, if we were to adopt a policy of reducing carbon dioxide emissions, a tax would be one means of ensuring that the least pressing uses are sacrificed first. But the primary issue is whether it makes sense to design such a policy.
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