Following on Reihan’s last post: I wonder whether there aren’t some ways in which it would be fruitful to think about extending the Alaskan model?
Alaska has some very valuable natural resources. Those resources belong to the citizenry. So, to make sure that citizenry gets its proper share of the benefit of the exploitation of those resources (as opposed to industry getting too big a share via corrupt deals with government, or government retaining too big a share for non-productive spending), Alaska pays cash dividends linked to the returns of said exploitation. That creates some admirable political incentives that Sarah Palin has exploited in her meteoric career.
Could the model be generalized? Perhaps to a greater degree than is generally appreciated. After all, while we don’t all live on land with a lot of oil under it, we all live in jurisdictions with air, water and soil. Pollution of these is a “use” of a common resource; Pigovian taxes are premised on the notion that this use should be paid for. As well, a whole spectrum of radio waves passes through all of our bodies. This spectrum is also a finite common resource, one whose auction is not structured to maximize value to the citizenry. Stretching the point a bit, when the government socializes a risk (e.g., by providing health insurance), individual choices that impact personal health (e.g., smoking) are a kind of “use” of a common resource. There are any number of ways that the Federal government licenses and/or taxes the use of what amounts to a national commons. Why not dividend that money back to the citizenry?
Basically, I’m suggesting that if you want to find the efficient level of Pigovian tax to assess, one way to do it would be by letting millions of voters vote their pocketbooks. The bigger the tax, the bigger the negative impact on the economy – but the more you’d receive in direct dividends.
To the extent that what goes into the pot is new revenue from new taxes, fees or auction proceeds, we’ve got a revenue-neutral marriage of a Pigovian tax and a negative poll tax. What would be the distribution effects? Depends on what we’re taxing. Let’s say carbon. Big drivers of carbon footprint, for example, are winter temperature, house size, commuting distance. That could make for an interesting regional redistribution mix. In terms of income segments, we’d be redistributing downward – poll taxes are extremely regressive, so negative poll taxes are extremely progressive. And, if distribution was on a per-capita basis (as in Alaska’s Permanent Fund dividend), the policy would be profoundly pro-natalist. Of course, to the extent that we’re not talking about new taxes, but redistributing fees already being collected, then we’d need to make up the lost revenue by raising other, broad-based taxes, such as the income tax or a consumption tax. This could also affect the distribution equation, though again the effects might well be progressive (certainly if the lost revenue was made up for with income tax hikes, but arguably if it was made up with broad-based consumption tax hikes like a VAT).
How much money would you need to dividend per capita to make such a scheme interesting? Let’s say, for the sake of argument, about $300 per person per year, or about $1200 for a family of four. That’s less than 1/5th of the 2007 dividend to Alaska residents. To give that much to every man, woman and child legally a permanent resident in America would require a bit under $100 billion in revenue. I should think it wouldn’t be too hard to put together a list of fees and taxes that fit the bill and make the total, particularly if we wind up taxing carbon or auctioning carbon-emission permits.
This is, literally, off the top of my head, so apologies if this is a shopworn idea, something that Obama’s campaign has already proposed, or that Ross and Reihan proposed in their book, or, on the other hand, something that everybody knows is ludicrous. If it is none of these, does it make any sense?