Laffer proposes taxing pollution, not income

From the Spring 2012 edition of Vanderbilt Business

Art Laffer speaking at Averbuch Auditorium

Arthur B. Laffer, a renowned economist and longtime champion of conservative causes, proposed a novel approach to taxation at a forum held in Owen’s Averbuch Auditorium Feb. 23. Laffer said he sees a fundamentally backward system in the United States, which imposes taxes on things people want more of—income and jobs—while allowing something we want less of—carbon dioxide pollution—to be emitted without penalty.

The situation should be reversed, Laffer argued. Instead of tax increases that are “veiled as ‘cap and trade’ schemes,” he said, Congress should offset a simple carbon tax with a reduction in income or payroll taxes.

Joining Laffer in the discussion was former U.S. Rep. Bob Inglis of South Carolina. “Art Laffer is a conservative who’s agnostic on climate change. I’m a conservative who believes it’s real,” Inglis said. “Both of us see opportunity in changing what we tax. For Art, it’s about his lifelong quest to reduce marginal tax rates. For me, it’s that—plus the opportunity to fix a market distortion that prevents the free enterprise system from delivering the fuels of the future.”

A member of President Reagan’s Economic Policy Advisory Board between 1981 and 1989, Laffer is the Founder and Chairman of Nashville-based Laffer Associates, an economic research firm that provides global investment research services to institutional asset managers, pension funds, financial institutions and corporations.