Thursday, April 15, 2021
Allison Christians (McGill; Google Scholar) presents The Case for a Sustainable Excess Profits Tax (with Tarcisio Diniz Magalhaes (Antwerp)) virtually at Indiana today as part of its Tax Policy Colloquium Series hosted by Leandra Lederman:
Taxes designed to counter unsustainable behaviours that lead to environmental destruction are usually styled as surtaxes on purchase prices. It makes more sense to locate the source of the profits derived from such behaviours and tax them in order to internalize the environmental costs that are currently externalized to current and future societies. Since profit extracted by externalizing environmental risks constitutes economic rent, it could be taxed at high rates without creating inefficiencies. We propose a method for doing so in the form of a “sustainable excess profits tax”—a SEP tax. The tax base of a SEP tax can be constructed by using life cycle analysis methods to identify the portion of corporate profit that is attributable to the externalized environmental costs of production and distribution at all stages of supply chains.
We establish the core elements of a SEP tax, demonstrate its theoretical justification, and examine its practical feasibility.