Yellow Vests Aren’t An Argument Against Green Taxes

This week, the government of France gave concessions to the “gilets jaunes” (the yellow vests), suspending the fuel tax rise for six months.

France has been rocked by mass protests for weeks, with an estimated 300,000 participants. These protesters have constructed barricades, blocked traffic, attacked roads and street signs with everything from fire to pulling up cobblestones, and burned cars themselves. They get their name from their distinctive yellow vests, mandated in vehicles by French law, and just as symbolic as their attacks on roads and cars.

Their major complaint seems to have been drastic increases in fuel and carbon taxes.

There is, here, so much low-hanging fruit for a site frequented by libertarians, constitutional conservatives, classical liberals, and anarchists.

For one thing, this is a good ole’ fashioned tax revolt. If libertarians have a catch phrase, I can’t think of anything more prevalent than “taxation is theft”. Constitutional and traditional conservatives are well aware of the importance of taxes in sparking the American Revolution. From the Boston Tea Party to tobacco to the founder’s own catchphrase of “taxation without representation”, it’s impossible to ignore that our very nation started as a tax revolt. Many anarchists seem to have their own appreciation for other early events like the Whiskey Rebellion which extended our tradition of tax revolts inward.

There are a few historical ironies which could get some cheeky treatment. After a little over two hundred years, France is revolting over excessive taxation, while Americans are utterly unconcerned with a 21-trillion dollar debt, representing over 100% debt to GDP ration. France is often stereotyped as weak, limp-wristed cowards, and Americans are fond of saying that if it weren’t for us, they’d be speaking German… yet they have been rioting in the streets against their government while Americans by and large have shrugged their shoulders and said things like “you’ve got nothing to fear if you have nothing to hide”, and “if you don’t like it, move to Somalia”.

One of the main complaints that the yellow vests have had about this specific taxation is that it isn’t as “progressive” as they are used to, as they believe it falls disproportionately on the middle class. However, focusing taxes on “the rich” to obscene amounts has worked roughly how one would suspect. Roughly 12,000 millionaires annually have been fleeing the country’s high taxation, often bringing their businesses with them. With a decrease of those in the income brackets France has traditionally deemed upper class (and therefore ‘safe’ to squeeze from a populist standpoint), France has more limited options of how much it can squeeze if it doesn’t wish to actually cut spending.

Macron has seen his support plummet, and his resignation has become one of the goals of some in the Yellow Vest movement. However, Macron was literally a member of France’s socialist party, and none of the actions angering Frenchmen can really be seen as much of a surprise.

If there’s one thing that libertarians are accused of hating, it’s “muh roads”, which these protesters have blocked, barricaded, and taken up, brick by brick.

Any one of these things is probably worth a closer look, whether as a fun romp through history, a dose of common sense, the sociological or economic realities that underpin this, or just a whole lot of snarky one-liners, twitter style, to flesh out the basic point of “I told you so” on any number of points.

However, I’m not just a form of libertarian. I’m a helpless contrarian.

I see consumption taxes, including those on fossil fuels, as preferable to taxes on productivity, such as income and corporate taxes. Further, I see taxes on fossil fuels as preferable to subsidies on alternate fuel sources, especially as dedicated funding for road maintenance or the military.

There have been libertarians to argue in favor of a gas tax before (especially in contrast to other forms of taxation), though it’s not a common, much less popular belief. The highest profile self-described libertarian to make the case was Elon Musk, but it’s hard for most to take his argument as sincere given how much he personally stands to benefit. Further, I know many libertarians who don’t accept him as one, given how many government subsidies go into the profitability of many of his companies, from electric vehicles to solar panels to government contracts and grants necessary to get to space or build underground tunnels or hyperloops. However, his argument hinges on his assertion that “Fossil fuels are already getting a massive subsidy if you believe in global warming”.

With respect to some of the other elements for solar panels and EVs, the big issue we have is that in reality if you accept the scientific consensus every oil burning activity is subsidized, dramatically. If you believe there is a value to the CO2 capacity of the atmosphere and oceans and that CO2 capacity is not being paid for by the price at the gas pump or the coal that is being burned for electricity generation or whatever its use may be then every single fossil fuel burning activity is massively subsidized. This has become sort of an ideological issue because there are people who think that global warming is not true. So if you believe it is not true then it is a subsidy for sustainable energy. If you believe it is true then all we are doing is trying to match the inherent subsidy for fossil fuels, match that on the sustainable energy side. That is all it is doing. It is not one is getting a subsidy and the other one isn’t. Fossil fuels are already getting a massive subsidy if you believe in global warming. If you don’t then it seems really unfair. If you do then it is like oh we are just trying to correct it.

The real right way to correct it would be to establish a carbon tax. If you ask any economist they will tell you that is the obvious thing to do, put the correct price on carbon because we currently have an error in the economy which misprices carbon at zero or something closer to zero. It is a fundamental economic error. For people that have a sort of libertarian bent they get a little confused because they need to appreciate the high level principle of why they are opposed to government intervention. They are actually opposed to government intervention because it causes false pricing. If the government says we are going to massively incent the production of corn, so that effectively corn gets mispriced and we make too much corn, that actually then does not benefit the country if you make too much of something because of a government driven pricing error. That is bad for people. That is sort of what people with a libertarian bent are opposed to.

However if you have something where you have an unpriced externality so that you have the case of the CO2 capacity of the oceans and atmosphere priced very close to zero then any government action to increase the price above zero reduces the error in the economy. I’m getting sort of esoteric in economics here, so what they should actually be opposed to is anything that increases the error in the economy, a pricing information error. So pricing carbon, if you believe in global warming, does not increase the price of the error it decreases the price of the error.

I made a case, years ago, for raising the gasoline tax in America and tying the exact numbers to a percentage of our military spending. In fact, it was one of the first articles I had published, but it was on a site which no longer exists, so if I can get some indulgence from my editor, I’ll get it reprinted here.

Stereotypically, taxes are the only things libertarians hate more than muh roads, communism, and prohibition. Hating on taxes is right up there with loving on guns, bacon, bitcoin, and homesteading. Hell, the most recognizable and successful marketing gimmick that we’ve used in years is the phrase “taxation is theft”, overused to the point where “taxes are the price we pay for a civilized society” has come into fashion as a standard response.

When it comes to taxes, I think there’s roughly three camps of libertarian thought on the subject. There’s the literal anarchists who still identify anarchy as a branch of libertarianism. There’s those naive enough to believe that a modern state could exist long upon strictly voluntary contributions. And then there’s the minarchist realists who recognize both the immorality of taxation, and also that it’s a necessary, unavoidable evil. Obviously I fall into that last camp.

Recognizing that it is a form of theft informs, in a moral way, my belief that such a practice should be limited. There’s also things less moral than theft, and the world simply isn’t simplistic enough to allow all or nothing systems like communism and anarchy to sustain themselves for long outside of a vacuum or the theoretical.

That said, not all forms of taxation are equal, either. As a general rule, you tend to get less of what you tax, and more of what you subsidize, due to incentives that are provided by each practice. For instance, a tax on cigarettes, booze, or large sodas are attempts to discourage use. Likewise, a tax on income is a tax on productivity. A tax on capital gains is a tax on a specific form of speculation. A tax on business is a tax on consumers. A tariff can act as a tax on foreign trade, which in turn is often a tax on consumers as well, as well as providing a preference towards some companies rather than others. Inflation is one of the most regressive taxes, and acts as a tax on savings at a time saving should be encouraged. Sales taxes are a tax on consumption.

When possible, I often prefer taxes that operate in a way similar to fees. For instance, the gas tax and things like vehicle registration fees are often used specifically to fund road construction, and aim to make those using the roads the ones who pay for the service that they are utilizing. Property taxes are often set aside for specific state spending on education, under the rationale that those most likely to actually have children are the ones paying for their local schools. FICA taxes indirectly affect the benefit structure for programs like social security, and are often used as the rationale for why such programs are investments by (admittedly unwilling) participants rather than traditional welfare-style programs, and the same goes for states which set aside money from your check to determine unemployment benefits in the case of job loss.

In general, when it comes to federal spending, I absolutely do not support new forms of taxation or anything aimed at increasing revenue. My economic focus is aimed nearly exclusively at reducing spending rather than increasing revenue as the preferable means of addressing deficits. However, there is one form of taxation I would actually support, one which is opposed by nearly all Americans of all political stripes even past those that are as rabidly anti-tax as libertarians… and that’s a specific type of increase to the gas tax.

I believe that a set percentage of military spending should be covered by a gasoline tax.

Such a tax would encourage investment into r&d of alternate energy sources that could eventually largely replace fossil fuels. One of the reasons I oppose subsidies to alternate energy sources, however, is that neither scientists, the government, or any of us really know at this point which type of alternative sources are likely to replace oil. As such, direct funding aimed in specific directions are likely to be malinvestments that distort and hide the true cost of emerging technologies. Once these investments are initially made by governments, nearly immediately lobbies are formed to keep such investments flowing, regardless of what the actual data says about anything from environmental impacts to sustainability to profitability that the market would consider.

For instance, ethanol subsidies began roughly thirty years ago now. In that time, we’ve learned that ethanol is worse for the environment than gasoline, given that it still takes over one gallon of gasoline to produce every gallon of ethanol. There’s no evidence that gains in productivity are likely to ever change that. On top of that, ethanol fuel is worse for engines, worse for the economy, and has distorted the corn market. However, to illustrate how powerful the ethanol lobby has become despite all the evidence against it’s functionality… Brazil recently sued the US by claiming such subsidies are an attack on free trade, and won. Instead of ending the subsidies to American farmers to produce, we simply started providing those subsidies to Brazilian farmers as well.

There are plenty of reasons to support a transition away from fossil fuels… they’re a finite resource, they prop up regimes and economic structures that couldn’t otherwise exist in places with large oil reserves, and then there’s the obvious environmental considerations most people would have cited first. The national security concerns that relate to the petrodollar and a world economy heavily dependent on oil are vast and obvious. As Kasparov famously said… “You can often do just fine on the wrong side of history if you are on the right side of a pipeline” Even those who dismiss environmental concerns about oil, should recognize the implications to our foreign policy, everywhere from Putin’s Russia to Venezuela, Iran, Saudi Arabia, and much of the middle east aside.

From an economic perspective, I think addressing this transition through artificially increasing the price of oil is preferable to subsidizing alternate energy specifically, because with the latter one is picking winners and losers without knowing which ones future technologies will favor while with the former we’re only picking one overall loser that we know is not infinite or sustainable, and benefits our enemies.

Given how much of our military actions are based on securing countries with oil, or fighting regimes only in power because of oil… oil is directly linked to nearly everything our military does in one way or another. A gas tax is the nearest way to fund our military where such a tax acts anything like a user fee. Seeing changes in the pump anytime military spending is pumped up, could give the average American consumer at least a taste of the direct link between military adventurism and it’s true cost, in a way that printing money simply does not. As a non-interventionist, I think we shouldn’t go abroad in search of monsters to destroy, and I think a gas tax could help inform the average voter of the true cost of intervening overseas unnecessarily. The numbers simply aren’t there to fund the entirety of our modern military through gas taxes, but at linking such taxes as a mere percentage could be enough to change both our energy system and the reflexive action of our military-heavy foreign policy. At very least, this funding method seems vastly preferable to paying for our military more or less exclusively by discouraging productivity through an income tax or discouraging savings through inflation.

The end result might just be arriving quicker at a more environmentally sound world with an energy sector that’s more sustainable that doesn’t benefit repressive regimes by making them partially immune to basic economic laws.

What is happening in France may be an argument against excessive taxation, or excessive spending on a welfare state. It may be an argument against have such a high level of progressive taxation that you chase off your rich and are forced to shift much of the tax burden to the historically middle class. From a libertarian perspective, modern tax revolts, especially in countries like France, seem like a positive development from the perspective of changes in cultural attitudes, expectations, and understanding in excessive welfare states that could have long term consequences.

But it’s not a convincing argument against the idea that consumption taxes are preferable to taxes on productivity or savings, or against the idea that gasoline or carbon consumption taxes are preferable to consumption taxes on, say, food.

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