A Tax Conservatives Can Love

This week's Economist calls a spade a spade: the world needs a carbon tax.

That's right, a conservative magazine favors a tax. (This one puts a pollution surcharge on energy produced from burning coal and oil, among other things). And they should, for two good, conservative reasons.

• A carbon tax helps market forces work.

Usually, free-market advocates hate taxes because they introduce inefficiencies. But taxes can actually help set proper rates for items with societal costs.

If your neighbor buys a new lawn mower, you're better off when instead of a gasoline-powered one, he chooses a quieter, less-noxious electric model. But there's no price-cut for him if he does so, nor is there a surcharge for the gasoline model. There's a clear advantage to one choice, yet that isn't reflected in the price. The market needs a 'nudge' to set it right.

This is sometimes addressed through rebates, as with electric cars, but that's inefficient and far less precise than a tax. More often, the government steps in with an outright ban of the offending item, which brings us to the second reason to favor a tax:

• A carbon tax means less government interference.

Often, the offending item faces an outright ban, as with lighter fluid (in Los Angeles), fast-flow shower heads (in San Francisco),  and large-flush toilets (nationwide). That's both heavy-handed (I wish I could apply my fine water-saving habits toward a good shower) and unnecessary.

We face even worse with the cap-and-trade system proposed for carbon. Under that system, the government would issue permits to coal and oil and other companies, allowing them to pollute up to a certain amount. It's become popular in Congress because politicians feel, perhaps correctly, that they can steer credits to their own states.

But what conservative would trust the government to get the levels right? And what liberal trusts companies to pass on to consumers the value of their new permits they've received?

It's far better to let the market work. Set a simple tax on pollution, then apply some of the revenue toward green solutions. That means less government intervention, less bureaucracy, and a greater chance for the market to work its magic.

What conservative wouldn't love that?