Fraser Forum

Once again, professor, you can’t equate a tax and a price

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Professor Stephen Gordon of Laval University has responded to my earlier post and to an op-ed by National Post writer Peter Foster.

Both Foster and I noted that there is an important distinction between a tax and a price. Professor Gordon is right that a tax on carbon affects the price of carbon—neither Foster nor I had ever maintained that it didn’t.

But that doesn’t mean that a tax is the same as a price.

And if Professor Gordon was trying to persuade readers that he sees the difference, he has failed miserably. Indeed, his response suggests that he comes close to equating the two.

Professor Gordon writes:

A market price is what a consumer has to pay in order to purchase a good or service. In contrast, a tax is, er, what a consumer has to pay in order to purchase a good or service. This is one of those cases of a distinction without a difference.

Professor Gordon, to his credit, goes on to show that he does understand the difference. Specifically, he understands that the revenue from an untaxed price goes to the seller and that the revenue from a tax goes to the government. My objection, as I made clear, was not that he did not understand this, but that he subtly equated a tax and a price to soft-pedal his proposal for a carbon tax.

His response suggests that I was right.

Interestingly, Professor Gordon did not respond to my other criticism of his op-ed. Specifically, I challenged his view that a tax on carbon would replace the many intrusive regulations that governments now impose to discourage the use of carbon-base fuels. He and I both agree that a tax would be superior to such command-and-control regulation. My point was, and is, that if the government imposes a tax on carbon, it would keep almost all of the current intrusive regulations in place.

Does his silence on this issue mean he concedes my point? I believe it does.