by Carl Milsted, Jr.

Environmentalists are concerned about global warming. Conservatives worry about the cost of reducing CO2 emissions. Libertarians grumble about the regulations proposed by many environmentalists.

So the debate runs as follows: Many environmentalists exaggerate the near term damage we can expect from global warming. Many conservatives and libertarians question whether global warming is happening at all. Moderates propose half measures. And moochers get government grants for economically unrealistic technologies.

Not good.

A better approach would be to ask: how can we reduce CO2 emissions at the lowest cost to freedom and prosperity? Once we frame the question this way, the answer comes easily: let the government specify only the requirement (reduce CO2 emissions) and let businesses and consumers decide how.

Specifying the requirement is straightforward. The government should tax fossil fuels based upon carbon content. This tax could be assessed anywhere along the supply chain. I recommend collection at power plants, oil refineries, tanker depots and major gas pipelines. This minimizes the number of collection points. However, the entire economy will see the effects of the tax, as costs get passed down the chain. Everyone will have an incentive to use less fossil fuels.

“Wait!” cry the libertarians and conservatives, “We are taxed too much already!”

I agree with this sentiment. But suppose we used the carbon tax to replace one of the more burdensome taxes. Consider using a carbon tax to tax the economy instead of the income tax. The paperwork reduction would be enormous. Instead of the government having financial information on every business and household in the country, the government would only need to monitor the aforementioned power plants, refineries and the like. The reduction in paperwork and increase in privacy would justify a carbon tax even if global warming turned out to be a trivial problem! We can justify action before the effects of global warming are noticeable even to the skeptics.

“But wait!” cry the liberals, “The income tax is progressive, while a carbon tax is regressive!”

Good point. So maybe replacing the income tax is a bad idea. How about replacing the Social Security and Medicare taxes instead? We replace one regressive tax with another, and we still get a huge paperwork reduction in the bargain. This change is more progressive yet when you consider that the government will no longer have records for who put in how much Social Security tax. Payouts will be based upon age instead of income history. If you want to be middle or upper class after retirement, you will have to save. Since a carbon tax is a consumption tax, we have a built in deferment for those who save for retirement. We can use this to replace the loopholes in the income tax for pensions, 401(k) plans and IRAs. All these simplifications make the payroll process far simpler. Small businesses will be more competitive against the likes of Wal Mart.

Now we have a system that reduces CO2 emissions far beyond the Kyoto Protocol requirements, reduces bureaucracy, encourages personal savings, increases financial privacy, and makes small business more competitive. This is but one example of the power of Holistic Politics.

Carl Milsted, Jr. is a senior editor for The Free Liberal.