Shifting from labour to natural resources taxes

Digging into the idea and calling for a community collaboration

Last week, I went into the idea of a revenue neutral tax shift from labour to natural resources taxes in order to:

· reduce natural resources use and pollution : taxes set on carbon (in addition to quota system), fossil fuels, electricity bulks and water bulks for industrial use, and VAT is increased on polluting or natural resources intensive goods

· make firms to employ more people and make green activities viable : revenues generated above make it possible to lower social contributions and income taxes. Additional incentives are added through payroll tax credit and zero percent VAT

While exploring ways to solve the ins and outs of that idea, I was reminded that we keep trying to find a miracle recipe to save us from an environmental catastrophe while keeping on living, and especially consuming, the same way. There is no such recipe, and we need to review our purchasing power expectancies, but solutions exist to get a better life quality on the meantime: meaningful jobs, better food consumption, softer transportation ways and work practices, higher social interactions and so on….

That being said, let’s dig into it.

The ins and outs of such a tax shift

Will there be any jobs created ?

The simulations conducted in Ex’Tax report show an overall job creation as higher taxes on polluting activities are compensated by a decrease in employer’s social contributions .

It assumes this decrease will foster job creation and we all know the limited impacts responsibility pacts can have on job creation whiteout having a clue about ways to be sure it will create jobs. At least, a salary-reliant tax decrease should be set to incentive companies to hire low salaries where most of unemployment is.

The most polluting activities, mainly the Energy & Utility sector that accounts for 1,5% of jobs in the EU, will still see their activity decrease followed by their number of employees. So, there may be a risk that the private companies leave the EU leaving it to public firms.

Are we going to keep our purchasing power ?

The decrease in purchasing power due to higher taxes on products should globally be compensated by the decrease on employee’s revenue taxes. However, simulations from the Ex’Tax project show that low revenues will see their purchasing power impacted. That’s where the idea above of a salary-reliant tax decrease makes even more sense.

How to ensure the environment is taken care of ?

The idea here is to not only take care of global warming but other environment challenges we are facing. While the first one is a global problem, the others require a more accurate approach, as illustrated by water and raw materials :

· Taxes on water consumption should apply depending on the level of scarcity in the area

· Increased VAT on products should consider the scarcity of raw materials required, in particular critical metals

As discussed above, the Energy & Utility sector would be the most affected sector so tax credits could be set to protect renewable energy production, even if it would already benefit from carbon taxes or quota (ETS) absence.

A call for community collaboration

There is a need for ambitious approaches like this idea that can help us reduce our resources consumption and foster job creation. But such changes will only come with a clever balance between a scientific collaboration, a society commitment and a political will.

Step 1 — Building a deeper model in collaboration with specialists

The Association Negawatt built in 2011 and 2017 an ambitious 100% renewable energies scenario thanks to the collaboration of several energy experts. French major environmental law called Grenelle II was significantly impacted by the 2011 scenario.

There is a bunch of environmental fiscalists, circular economy experts and EHS engineers that could work together to elaborate scenarios towards a shift from labour to natural ressources taxes. Even if simulation has its limits, various options need to be evaluated by playing with variables: introducing additional credits to foster the renewable sector, preserving low income from inequalities, etc. The Ex’Tax could pilot and guarantee that it gets a consistent and clear approach at EU level.

The collaboration would be fostered by a hackaton/meetup launch and a continous open source methodology (models, simulations,etc.) to share intelligence.

Step 2 — Relying on “commun-tech” to get people feedbacks

French readers can read this article explaining what are the civic-tech.

After calculations comes the time of society mobilisation to get feedbacks about the approach and build a support community. Common-tech, a branch of civic-tech, gathers applications to enable communities to inform, organize and take decisions on their own. Some of them can be really powerfull, for example DemocracyOS, an open source consultation platform. A project could be created there to get people to react on a bunch of aspects of the tax shift.

Step 3 — Whispering to the ears of politicians

No change can be made without a political adhesion. Platforms like Change.org could play a role being the place for a strong petition at EU level. Here is the toughest step as such measures need to be set at european level.

A few years ago, the idea of a minimum income for all seemed hysterical. A major candidate to french elections shared it a few months ago, as a solution to the labour big challenges of our century. Let’s be as ambitous when it comes to the environment.

Shifting from labour to natural resources taxes (Pt1) ← P R E C E D E N T