Saturday, May 20, 2006

Solving the climate change and budget problem in one go....

The US has a large budget deficit and low auto mileage. There are two ways the later problem could be solved. The first would be to mandate fleet mileage limits, but as we have seen this is a game that the auto companies play, the second would be EU level taxes on gas. Since the latter are regressive that must be accompanied by equivalent cuts on payroll taxes which are regressive. The net effect would be neutral or slightly progressive. If accompanied by lifting of the maximum earnings on which Social Security taxes are levied the effect would be to make the total tax system much more progressive, increase revenues and solve the Social Security funding issue into the far future.

Prof. Rabett's handy dandy all purpose maxisolution.

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