A major part in the rebranding of the British Conservative Party following a traumatic election defeat (sound familiar?) in 2005 was a turn to environmentalism. Part of this was a plan to introduce “green taxes,” theoretically shifting the focus of taxation from labor (taxing a ‘good’) to carbon production (taxing a ‘bad.’) This morning, however, The Guardian confirms what many have been saying for some time; the Tories have decided
To downgrade green taxes in response to growing unease that these could be punitive in a recession.
Now how would green taxes be punitive when they are taxing bads rather than goods? Simple. Given the current strong correlation between the use of affordable energy and economic growth, taxing carbon use upstream (ie at source of carbon production) is a direct attack on desperately needed wealth-creation. Tax it downstream (ie apply the tax when consumers buy the goods associated with carbon production) and you are increasing household bills in a recession in a regressive fashion. Oh, and if Gordon Brown is advocating a Keynesian tax cut as response to the recession, it looks bad politically too.
Green taxes may have made sense if you thought that wealth could be created out of thin air by, oh for example, ever-rising house prices. In a less fantastic world, they are a luxury we literally cannot afford.