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Wednesday, December 31, 2008

These plans for tax hikes are just hot air


With a budget crisis of extraordinary proportions, there's a strong whiff of taxes in the air. If we're not careful, we'll find ourselves downwind of the latest taxing rage: flatulence. For some reason, the ill wind of gaseous emissions is very popular among tax-hungry lawmakers and a good symbol of all that's wrong with tax policy.

It's the kind of story you expect to see on April 1: "Farmers protest tax on bovine emissions." The government of New Zealand, caught in a frenzy of something or the other, proposed a tax on the gas emitted by grazing livestock. The government found that livestock were the source of 90 percent of the country's methane emissions. Methane is considered to have 23 times the atmospheric warming potential of carbon dioxide, which New Hampshire has begun regulating. New Zealand's methane solution was the flatulence tax.

In New Zealand, the tax proposal created a huge stink and then died. Estonia, home of the flat tax, added a flatulence tax earlier this year. It, too, was quickly repealed. Then earlier this month, the Environmental Protection Agency turned out to be exploring the tax as one important way to reduce cow flatulence. I swear I'm not making this up.

This is all very silly, but there is a serious point to be made about the abuse of tax policy. Apparently there are some clean air concerns about methane. According to the Department of Energy, livestock accounts for about 30 percent of the 690 million tons of methane emissions, largely through flatulence.

There is a great deal of research into improving cow digestion. Argentine researchers have cows wandering around wearing giant balloons the size of their body to capture gas. They have their hopes pinned on alfalfa to quell the bovine intestine. Welsh researchers are equally optimistic about garlic. Not that the tax would have been any lower for cows with good digestion.

Increasingly, advocates with unmet policy goals look to achieve those goals through tax policy. The more sophisticated have come up with fancy names to support their cause. What you and I might call "nanny-state taxation," they call Pigouvian after an economist who believed taxes could be used to recover the social costs of whatever the observer determines is bad.

Pigouvian is the currently popular term for those economists who see all sorts of virtue in raising the gas taxes I have to pay. But it's just the latest term for the long-standing trend toward a tax nanny.

New York's newly proposed soft drink tax is called an obesity tax to make it seem more health conscious. They don't really tax people on the basis of their body-mass index, but this way it doesn't just seem like they're going after money to fix their deficit. Voters in Maine wanted to enjoy their root beer so they repealed their soft drink tax last year by a 2-1 margin.

Politicians out West want to encourage us not to use bags at the grocery store, so they have a grocery bag fee. It doesn't apply to the same bag if you use it at the hardware store, though. New Hampshire proposed a disposable diaper tax 20 years ago, a candy bar tax two years back, and who can forget the dreaded balloon tax?

Politicians wish more people chose to use recycled shopping bags or cloth diapers, stop eating junk food or stop letting go of their balloons. They finally figured out that taxation is a way to allow them to control your behavior and raise money at the same time.

The other problem with nanny taxation is that it's regressive. The rich shopper can afford dozens of grocery bags, lots of diapers, another few dollars when he fills up at the tank and high-priced root beer. The people struggling in the current economy (or any economy) aren't cutting coupons so they can send the savings on to the government.

In New Hampshire, we raised cigarette taxes three times in the last four years. Everyone claims to feel bad that it hurts poor people a lot worse than rich people, but we "need" the money. And after all, they shouldn't smoke anyway.

In the current economic recession, we can all agree that raising taxes on struggling businesses will hurt. Raising any tax on consumers trying to scrape by is equally bad. Let's not make it worse by pretending we're doing it to help them or it's for a noble cause. Instead, let them keep their own money and behave as they wish.

As for the struggling farmer and his poor cow, don't tax his livelihood and don't make poor Bessie wear a giant collection balloon. Please. Just buy him some alfalfa.

Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.

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