The following text aims to analyze the following problem: "What consequences will the implementation of a carbon tax have in the economy of the United States?"
By implementing a SWOT analysis, the main aspects that could affect the economy of the country were identified, and based on that, the researcher concluded that implementing a Pigovian tax would be a bad decision.
The main aspects that were identified are: Society, Capitalism, Immigration, Uncertainty, and Ethical impacts. They represent the negative domino effect that will be created after the tax is implemented. It starts with an increase in prices that leads to a cut in jobs, adding current issues such as illegal immigration, and ending with the negative impact on the economic cycle as consumption dramatically decreases. The last factor is uncertainty. There is a high degree of uncertainty that comes with the creation of a Pigovian tax. Uncertainty brings a great amount of risk to the creation and implementation of a carbon tax and is a good reason to consider not doing it.
When a controversial movie about global warming called 'Inconvenient Truth' was released in May of 2006, countries from around the globe started to worry about this new issue and the ystarted to evaluate the importance of using new alternative sources of energy"-solar, hydroelectric and nuclear energies- that are not connected to hydrocarbon fuels (coal, petroleum and natural gas)" because hydrocarbon fuels are considered to be a negative externality. The search for new sources of energy is an attempt to decrease the high levels of carbon dioxide.
Butin order to meet the current demand of energy with non-hydrocarbon fuels,there must be a new governmental budget that affords such an investment. This all leads to the proposal of creating a carbon tax known as Pigovian tax in the United States. Currently,lawmakers in the United States have not agreed on implementing such a tax, but some states agree on implementing this measure as part of the main solution for this issue.Since the United States is currently recovering from an economic crisis and the protection of the environment is becoming a priority, a Pigovian tax is an alternative to try to solve the problem of pollution.However, the economy is very susceptible to changes and analyzing the impact of this tax could be crucial for the government.A bad decision by the government could really hurt the opportunity to have an economic recovery and instead, it could contribute to drive the economy into another recession.
This paper aims to analyze the impacts that a carbon tax could have on different parts of the United States in order to suggest if such a tax will be a positive or negative decision that will ultimately affect the economic recovery of the country.With that in mind, I have proposed the following research question:
"What consequences will the implementation of a carbon tax have in the economy of the United States?"
Benefit or Damage? 利益或损害？
Before starting to analyze some aspects related to the creation of a carbon tax, the investigator believes that after gathering information and comparing the possible effects of the implementation of that sort of tax , a carbon tax will negatively affect rather than benefit the economy of the United States.Fur the ranaly is will show why the researcher comes to that conclusion.
Impact on Society 对社会的影响
A Pigovian tax is basically "a way of correcting negative externalities, which occur when a product costs more to society due to the actions of an industry.That additional cost to others forces the government to create additional taxes for that industry."By implementing this tax, the government assumes that the tax measure will not affect a large percentage of the United States citizens, especially since the tax will be created only for those businesses that are producing too much carbon dioxide and contaminating the earths' atmosphere and for businesses that have the money to invest in cleaner energy sources. In this case, the carbon tax will make contamination more expensive for the companies that are causing it and the creation of such a tax is a better policy than implementing other environmentally-friendly policies.This results in a win-win situation for the government and citizens.
On the other hand,there is another point of view towards the carbon tax which points out that such a tax will have a direct impact on small businesses,workers, and the unemployed, based on six social classes in the United States:"The upper or capitalist class, the upper middle class, the middle class, the working class, the working poor class, and the underclass. Sociologists Dennis Gilbert, William Thompson, Joseph Hickey, and James Henslindeveloped this social class structure in 1998" and they determined a specific percentage for each class . According to the graphfrom Appendix 2, more than 80% of the population in the United States is located in the middle and lower social classes. This population is made up of small business owners, workers and people who are unemployed. Having that in mind,the investigator's opinion is that 80% of the population is going to be more affected if a carbon or Pigovian tax is introduced, mainly because the upper social class,which is represented by the owners of big companies and factories, will simply take the new tax as a new liability within the company and they will not be affected as much as the poorer classes. In order to cover the new liabilities, company owners, CEO's, and upper management will start cutting expenses in order to balance themselves out again, without having to reduce their profit. They will cut expenses by optimizing processes, buying cheaper products and raw materials,and laying off employees or replacing jobs in all areas of the company. Because most of the businesses are not flat organizations, the jobs that will be cut off or replaced will come mostly from the bottom of the pyramid where upper and upper middle class people are not usually located. What the investigator believes is that in an economic crisis, the creation of taxes such as the carbon tax, combined with other economical factors do not affect the upper and upper middle social classes very much because the people from these classes are able to manage difficult times more easily, but in the case of the general working class, these workers get either fired or they are offered a lower wage.If such a tax can affect so many United States citizens why was it considered as a solution for CO2 emissions? The answer is based on the principle of negative externalities. A clear example is this:A car driver does not take into account the costs of air pollution created by the car, but the society is paying for the cost of air pollution.  In this case the negative externality is the contamination of the environment with carbon dioxide in the United States.One possible solution is taxing big businesses with a Pigovian tax in order to reduce pollution because they are responsible for most of the contamination.
Instead of trying to punish businesses by creating new taxes,the government musthelp them. UC Berkeley business professor Laura Tyson has said that"the US should lower its corporate tax rates, which are currently among the highest in the world to bring jobs back to the country.Â A lower rate would strengthen incentives for investment and job creation in the US, and weaken incentives for tax avoidance. It would also reduce numerous efficiency-reducing distortions in the US tax code, including substantial tax advantages for debt financing over equity financing and for non-corporate businesses over corporate businesses."After all,businesses take care of the lives of most Americans. The better they are financially, the more money businesses will be willing to invest in new companies, creating more jobs, increasing salaries, and even donating money to help the planet.
Everything that the investigator mentioned above contributes to one of the main factors that affect the economy of the United States in either the creation of new jobs or the impossibility to create them. If the American government rewards and in centivizes big businesses with fewer taxes and expenditures in order to encourage them to try new energy options and those businesses start getting higher profits,there will be less pollution and positive changes in the environment.
Impact on Capitalism 对资本主义的影响
The daily products that people consume will become more expensive because no matter what a business may offer, at some point, a hydrocarbon derivative will be used in the production process inside the company and additional taxes will make prices go up in pretty much all products that are available in the United States. In this case, the issue is not that a carbon tax is created to control carbon dioxide levels.The issue is that the consumers of the products will eventually pay the tax. A much bigger problem is now taking place.Consumption will dramatically decrease because jobs will be eliminated; prices of most products and services will also increase. This is not the ideal scenario for the type of economy of the United States.In a capitalist country, such a huge decrease in consumption will dramatically impact the economy of this country.Based on the theoretical economic and political condition known as consumer capitalism,consumer demand is manipulated in a deliberate and coordinated way and it is done on a very large scale through mass-marketing techniques to benefit sellers .The capitalist economic system of the United States depends on a cycle which moves money constantly through all six social classes.This cycle benefits big businesses by letting their money partially return to them throughthe consumption of the products they produce."The latest U.S. economic recovery has been driven by an extraordinary boom in consumption spending. Between 1947 and 2000, personal consumption spending averaged 64% of total gross domestic product . Over the latest economic recovery , it has a veraged Â 70%. " Josh Bivens states that based on this previous data, it can be said that the United States has depended on consumption in order to get out of difficult economic times.The country is currently still recovering from an economic crisis and consumption is crucial in order to stabilize the economy.Consumption is the main engine that promotes such high levels of innovation of products that change the lives of Americans.
"Dennis Carlton and Glenn Loury argued that Pigovian taxes alone would not create an efficient outcome in the long-run because taxes only control the scale of the individual firms, not the amount of firms in a particular industry. " So even if a standard carbon tax makes companies reduce their hydrocarbon emissions, after some time, new companies will emerge with similar or lower emissions.There will not be five or ten huge companies polluting at the same time, but there will be dozens of small businesses doing it. Then, a new tax will have to be implemented.Those changes are not really targeting the main goal - Helping the environment by reducing pollution--.
Another point that needs to be considered is that there is the possibility that such a new tax is only meant to take advantage of the current global importance towards pollution when it should be really meant to gather the necessary resources to finally overcome the current economic crisis  . This possibility will not only give the United States government a bigger economic power, but it also improves their current image towards the new "green wave", especially since that country did not sign the Kyoto Protocol. "The Kyoto Protocol is an international agreement linked to the United Nations Framework Convention on Climate Change. The major feature of the Kyoto Protocol is that it sets binding targets for 37 industrialized countries and the European community for reducing greenhouse gas emissions. They amount to an average of five per cent against 1990 levels over a five-year period .The major distinction between the Protocol and the Convention is that while the Convention encouraged industrialized countries to stabilize GHG emissions, the Protocol commits them to do so". By creating a carbon tax they will show an interest towards the improvement of the environment without having to commit to a Protocol such as the one mentioned earlier. The problem comes when the government raises taxes so much that companies will eventually become bankrupt because customers cannot pay for some products due to the increment of both taxes and basic expenses .All of this occurs up to a point where the country goes under such an economic crisis that a consumption boom won't be able to fix it.
Illegal Immigration 非法移民
A study released by the Federation for American Immigration Reform (FAIR) estimates that illegal immigration now costs federal and local taxpayers $113 billion a year. The report,Â The Fiscal Burden of Illegal Immigration on U.S. Taxpayers, is the most comprehensive analysis of how much the estimated 13 million illegal aliens and their U.S.-born children cost the federal, state and local governments. These huge numbers of illegal immigrants that currently live inside the United States contribute with the generation of carbon dioxide.
If such current problem of illegal immigration is combined with a carbon tax, the results will be negative regarding the economy of workers, which represent around 80% of the United States population.Having in mind that the carbon tax aims to control the use of hydrocarbons as a source of energy and that the production of carbon dioxide inside the United States is composed of both legal and illegal people within the country, the real problem emerges when the tax is implemented and people start paying it because even if all works out and this new tax is accepted by society,after some time, the government will have to increase the tax due to the high quantity of illegal immigrants entering the country every single day, resulting in an important increase of CO2 emissions.On the other hand, United States citizens will practically remain the same in numbers but they have to pay a higher tax to help fix the growing problem.
Uncertainty of a Pigovian Tax 庇古税的不确定性
An uncertainty is a"situation where the current state of knowledge is such that the order or nature of things is unknown, the consequences, extent, or magnitude of circumstances, conditions, or events is unpredictable, and credible probabilities to possible outcomes cannot be assigned. " This relates to what I mentioned earlier.The government of the Unites States cannot make a tax over something that cannot be measured with accuracy because it changes every second and it is all based on random occurrences, making this tax constantly change without ever really satisfying the different necessities present on the different social classes .
"William Baumol argues that it is extraordinarily difficult to measure the social costs of any externality, especially because many costs are psychological and individual. If experts could find the optimum output level, it would be easier to find the optimum Pigovian tax level to achieve that optimum. In the end, Baumol argues that the best solution is to set a minimum standard of acceptability for negative externalities and create tax systems to achieve those minimum standards". Taking Baurmols' opinion and knowing that uncertainty will always be present with the Pigovian tax, it can be inferred that the idea of such a tax in the United States represents a perfect solution, where only the "rich" will pay the tax and the environment will be protected.But the truth is that a Pigovian tax relies on problems that are uncertain along with the benefits it is supposed to bring along.There are far more negative aspects about this tax than positive aspects, and implanting such a measure is too much of a risk.
Ethical impact 伦理影响
By implementing a carbon tax there will not only be and negative impact on the economic life of the people affected, but an ethical issue could be generated, where the United States government is telling companies that they may do whatever they like as long as they are paying for it.Certainly, this is not a positive factor on the Pigovian tax.
Also the money raised by the tax will not go to the people affected by the negative externality (pollution), but for the government, creating a longer process in which time and money will be lost.Another factor is that since the government manages many taxes and expenditures, this additional tax could add to the money and time issues.
Regarding to the question: "What consequences will the implementation of a carbon tax have in the economy of the United States?",the paper outlines the basic reasons why this tax is not a viable solution because of the negative impact on society and the economy.
It can be concluded that basically the Pigovian or carbon tax will trigger a series of problems, starting with the impact on companies that will cut off jobs and raise prices, which will cause a drop in consumer consumption, affecting the country's' capitalist economy and wasting some years spent on effort and money in order to create a boom in consumption to get over the economic crisis.
Finally the Pigovian tax is not a viable solution for the United States.It is too risky for the economy because of the unique way that people are used to consume as well as the number of illegal immigrants that are living in the country. Other options should be analyzed, where the upper class is controlled but also helped.After all, they are the ones that generate the jobs, money, and have the resources to change the way the United States currently produces, processes, and transports products inside the country. There has to be a solution that affects and benefits everybody so that the environment can start to change along with the quality of life of the American people.
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