Shills for Humongous Government

April 11th, 2013

Peter Nolan

by
Thomas J. DiLorenzo

Recently
by Thomas DiLorenzo: Allen
Guelzo Misinforms the World Socialist Movement About Lincoln

In the April
8 issue of the Wall Street Journal George Schultz and Gary
Becker advocated a massive new carbon tax. Their arguments are based
on very poor economic reasoning and an extremely naïve view
of politics and politicians.

Schultz and
Becker argue for a “revenue-neutral” tax on all forms
of energy that burn carbon. “Revenue neutrality” is Washington-speak
for the notion that a change in tax policy should neither increase
nor decrease total tax revenue collected by government. It is a
pure fantasy, in other words. No central planners in world history
have ever been so brilliant and so omniscient as to be able to restructure
a major portion of the tax system in a country of more than 300
million people in a way that produces exactly the same revenue next
year as this year. In reality, “revenue neutrality” is
always just a smokescreen for “tax increase.” Politicians
will always “err” on the side of raising taxes despite
all their diversionary lingo.

In advocating
heavy new taxes on energy Schultz and Becker completely ignore the
fact that there are already myriad taxes of all kinds, along with
the implicit tax of regulation, on all aspects of energy production
and distribution. There are excise taxes, corporation income taxes,
payroll taxes, and the regulatory prohibitions on drilling for oil
in the outer-continental shelf and in much of Alaska where there
are known to be massive oil reserves. One can just as easily make
the case that the energy industry is over-taxed as under-taxed,
as Schultz and Becker do.

They do make
one good recommendation – elimination of “subsidies” to
energy producers, but they fail to mention even one example of such
subsidies to illustrate their point. One would hope that they do
not refer to tax deductions or “loopholes” as “subsidies.”
To do so is to assume that government owns all of our income and
is “subsiidizing” us whenever it does not tax all of it.

Schultz and
Becker advocate the worst possible form of tax collection – hiding
their new energy tax from the public by imposing it “at the
level of production,” which they call “administratively
more efficient” than imposing the tax at the point of consumption.
Hiding the tax in this way will fuel anti-capitalistic bias even
more since the average citizen faced with a higher energy bill will
naturally blame the greedy energy companies instead of the tax-hungry
government. Worse yet, such a tax would be regressive, imposing
a disproportionate burden on lower-income citizens.

It gets worse.
Shultz and Becker also advocate an expansion of the welfare state
by paying people on welfare even more than they are paid now for
not working by distributing the proceeds of their carbon tax as
part of the ludicrously mis-named “Earned Income Tax Credit.”
Government can play Santa Claus by sending out such checks to welfare
recipients and calling the checks “your carbon dividend,”
say Schultz and Becker.

And it gets
even worse. The rate of the new carbon tax should keep increasing
forever, “approximately at the real interest rate,” they
say. They claim that this would be only fair by plundering future
generations at a similar rate of plunder being imposed on the current
generation (although they do not, of course, use the perfectly accurate
word “plunder” in their article).

If there is
revenue left over after subsidizing welfare parasites with “carbon
dividends,” Shultz and Becker believe that government should
further politicize research and development with “sustained
support for research and development in the energy area.”

George Schultz
and Gary Becker are old lions of the Chicago School of economics.
It is mystifying how that school of thought ever became associated
with “free market” economics.

April
11, 2013

Thomas
J. DiLorenzo [send him mail]
is professor of economics at Loyola College in Maryland and the
author of The
Real Lincoln; Lincoln
Unmasked: What You’re Not Supposed To Know about Dishonest Abe,
How
Capitalism Saved America, and Hamilton’s
Curse: How Jefferson’s Archenemy Betrayed the American Revolution
– And What It Means for America Today. His latest book is
Organized
Crime: The Unvarnished Truth About Government.