An Untax Is Not a Tax

What’s a tax? That’s when the government takes your money and spends it. Right?   What’s an untax? That’s when the government charges you but refunds all the money and doesn’t keep any.  What’s the point of that?

How to Refund?  Like they Do in Alaska—per Person

An untax is almost magical, but not quite. There would be a charge for carbon emissions, but all the money would be refunded on an equal per-person basis.⁽¹⁾No we can’t give you back your exact carbon charge. That wouldn’t work. Then the more you emit, the more you get back and that reward will exactly counteract the charge for emitting. But a per-person refund works perfectly. That’s exactly what Alaska does with its tax on the oil pipeline—it puts the money in the “Alaska Permanent Fund” and out of that it pays every resident of Alaska, young or old, about $1,000 every year.

Is It Free?

If you stay as good as average, yes. And if you do better than average, you come out ahead. But if you do worse than average, it will cost you — but only for the amount you emit above average. This is why it works. People are rewarded for helping out and charged for using more than their share.

Who Is Actually Charged?

Only big carbon producers would be charged—refineries, coal mines, gas fields. This would hit all the sources of carbon without bothering individuals or most businesses. And when the price of oil is very high, we could slack off on the charge to refineries since the OPEC tax would be high enough.

Click to enlarge.

US energy use went almost flat for the 11 years of high OPEC prices. Graph is Figure 8.1 from Dick Cheney’s 2001 National Energy Policy Development Group.

Would It Work?

Yes. It’s a way to put a price on carbon emissions, and pricing is the way markets get people to do things — prices, not regulations, drive the whole economy. By far the most effective carbon policy ever implemented — probably fifty times stronger than any policy implemented by environmentalists — was carbon pricing. And it only priced oil carbon, not coal or natural gas carbon. That was OPEC’s 1974 – 1985 oil-price-spike policy. That caused the world to change in a million different ways, CAFE standards on cars, gasoline taxes in Europe, general energy conservation consciousness. The lasting effect of that policy is still saving more carbon in the US (compared to what would have happened) than all the carbon now emitted by driving.

You can read Carbonomics—the one book that explains the untax—free on Google .