Reading time: 3:00 | Most people I know optimise their tax obligations whenever possible. A majority believes the government isn’t competently spending their taxes. Thus, slashing taxes is a great political message if you want to win votes.
We were all in for tax slashing. But this is over now. Partly due to successful mitigation of the economic hardships in the wake of the Coronavirus pandemic by spending billions of Euros, partly because climate warming starts looming badly, and we know that will be costly. We only have a very rough idea of what we will be facing.
Fixing the climate with the white knight’s mighty future technology is a global myth supported by the same people who sell trickle-down economics to fight unemployment and poverty: rich, tax-evading egoists seeking to enrich themselves whenever they can.
According to Paul Krugman in the NY-Times, reduced taxes is not an incentive to work harder for people with already high incomes. On the contrary, Krugman proves that the additional money will mostly go into leisure time and consumption. The extra money won’t ignite investments into innovations or future businesses, creating jobs and wealth for everyone as trickle-down economics suggest. It will do what every kid in the kindergarten knows: in surplus, more money means more toys for the sandbox which means more fun.
But today’s fun won’t fix tomorrow’s issues and undoubtedly not the most significant threat humanity has ever faced: global climate warming.
There is overwhelming evidence that a person’s carbon footprint is somewhat connected to a person’s income. Although India’s economy depends much more on fossil energy than Germany’s economy, the average German has a four times higher footprint than the average Indian (8 tonnes vs 2 tonnes of carbon dioxide per year). However, Germany’s GPD per-person income is roughly 20 times higher than in India, which is about 2,000 USD.
I’m not suggesting bringing down incomes radically to save the world. As the example above shows, this isn’t working linearly. But we get an idea of that taxing income has an influence on the carbon footprint. Hence, it is worthwhile to completely rethink tax policies in times of climate warming. The old concept of tax hikes to fight crises and the subsequent tax reductions to promote consumption and economic growth, which, in the long run, primarily benefited the rich in the past, probably won’t cut it anymore.
To secure the future of our descendants, we have to invest in the next decade much more than we probably can imagine. And this isn’t a thing of the well-known rhythm of booms and slumps. We are in uncharted territory and have to prepare ourselves for something much bigger than the Financial Crisis of 2007 or today’s Coronavirus pandemic with their respective temporary slumps. Especially the pandemic gives us a little foretaste of what to come.
The German Bundesverfassungsgericht ruled on 24 March 2021 that the German climate-protection law from 19 November 2019 is insufficient to protect the climate and must be rewritten. In a nutshell, the court argues that the freedom to spend carbon today (they call it CO2-relevanter Freiheitsgebrauch / CO2-relevant use of freedom) will limit future generations’ freedom and, thus, is non-constitutional. The ruling has been a great success for the Friday For Future movement, the plaintiff on that case, and anyone else involved in the climate-protection movement.
However, the ruling comes with a warning, which I consider as truly new and game-changing. Being a philosophical entity, a fundamental right, a thing of quality rather than quantity, freedom is now a commodity with a value assigned, which, at some point, can be quantified in hindsight. It will cost us uncountable billions to prepare for the time when global warming will hit us with full force. How much we don’t know yet, but eventually, we’ll find out.
Until then, we have to work full-throttle on a resilient state with the funds to act comprehensively when required. As the Coronavirus pandemic showed us, bold spendings are necessary to fight the dire consequences of such a natural catastrophe. Only just taxes will provide sufficient funds and makes us a united society resilient enough to weather the future.