Friday, February 02, 2007

Furman signs up

Jason Furman testifies for the Senate Budget Committee on the long-term fiscal gap and, in the process, becomes a member of the Pigou Club:
A third promising strategy for tax reform is to rely more on taxes that correct distortions and improve the functioning of markets. For example, as N. Gregory Mankiw has argued, "A tax on carbon is the best way to deal with global warming." There are legitimate concerns that such a tax, by itself, would be regressive and disproportionately affect low- and moderate-income families. These concerns, however, could and should be addressed by combining a carbon tax with other tax cuts that compensate low- and moderate-income families. Or, alternatively, a carbon tax reform could be combined with tax cuts in such a manner that it was both revenue neutral and distribution neutral, although in this case it would not have the benefit of reducing the long-run deficit and thus would not reduce the need for other revenue increases or benefit cuts.