Adam Smith Institute

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No they can't!

Pieces like this really do annoy me:

Airlines can be charged for their greenhouse gas emissions on flights to and from Europe, according to a landmark court ruling on Thursday.

You can't charge or tax a company. You must be, in the end, lifting money from the pocket of some live human being. So you can't charge some mysterious legal entity for carbon emissions: you must be charging some group of people. As, way down the piece, is finally admitted:

All of the costs are likely to be passed on to passengers, raising ticket prices.

Well quite. Which is where we want the taxes to be anyway. Assume that you're all onside in this climate change thing: what we want to do is thus change the incentives people face when they choose among certain actions. If there are emissions associated with one course of action and none with another then we'd like the price of the emitting one to include the future costs of those emissions. Thus such taxes to internalise the externality. This isn't quite rocket science, it's plain and basic economics.

But so also is the point that it's not the airline that is bearing these costs. OK, in this particular example it's not a particularly grievous sin but it does become so in other conversations.

For example, we're routinely told that "companies must pay more in tax": yet companies do not and cannot pay tax as above. To ignore this is to miss the subtleties of who actually does have their pockets lightened by the higher tax. Largely, in the UK experience, the workers of the country in lower wages.

Similarly, the Robin Hood or Financial Transactions Tax. You know, make the banks pay? But the banks won't pay, can't pay. It'll be largely the consumers of what banks provide (ie, us) and the workers in the banks who will have their pockets lightened. Not quite the rhetoric we're being bombarded with to get the tax passed, is it?

This whole subject is called tax incidence and if you don't pay attention to it the politicians will bamboozle you, telling you that it's just those companies over there being taxed while in fact it's your pocket that gets lighter.

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