No one wants to tax the middle class. Conservatives generally don’t believe in taxes, and liberals often believe in taxing the wealthiest citizens. We can and should, however, raise taxes for everyone — but not income taxes.

Taxation in the United States must be utilized to rearrange incentives. This rearrangement can be leveraged to not only raise revenues but also effect positive societal outcomes such as less smoking, less carbon emission and healthier eating habits. 

The market may correct itself in terms of monetary costs of goods and services, but these monetary costs will not always reflect the true costs, which is to say that the amount of money paid for something does not reflect the full toll it takes. On a small scale, buying an ice cream cone might cost $2, but if it takes 20 minutes to get to the ice cream store, the true cost of that cone should include those 20 minutes. On a larger scale, the price of gasoline reflects the value on the global market, transportation costs, refinement costs and taxes, but not the toll that burning that gasoline will take on the environment.

In the case of carbon emissions, a carbon tax could rearrange incentives to reflect the true costs, rather than merely the monetary cost, of gasoline and other emissions. British Columbia has already implemented such a tax of $30 per metric ton of carbon dioxide emitted. With this tax, they have reduced emissions almost 10 percent without any economic consequences.

I think such innovations could take place in other industries, as well. We should tax anything that has a higher social cost than financial cost: bullets, carbon emissions and especially high fructose corn syrup. Extant evidence from studies involving rats suggests that high fructose corn syrup can be addictive and that it can be more fattening than an equal caloric intake of table sugar.

Both of these facts make sense. It is well known that fructose activates sweet receptors at a greater level per unit than table sugar. Additionally, fructose cannot be utilized by the body like glucose and must first go to the liver to be processed, often first into liver fat. Hence, epidemiologically, the consumption of high fructose corn syrup is bad and carries a significant medical and human cost.

The key to effective policy here is to make this cost felt financially. Producers who choose to use high fructose corn syrup should be forced to take this additional cost into consideration when choosing whether to add sugar or corn syrup to their products.

In this manner, we bring into line the current “cost” of an action (how much the materials to make the item cost) and the more important societal cost (the net effect of the creation of the product that includes the use of the initial materials and the negative consequences).

The first counterargument is clearly that these taxes will lower consumption and thereby lower gross domestic product. This theory, however, rests on the idea that GDP effectively reflects value in society. In reality, GDP only reflects material value; it tells us how much stuff we made, but not how much it hurt the planet or our health to do so.

As conservative voices such as David Brooks have long pointed out, with increased societal freedom has come the corollary decrease in societal ties. Previously, these social bonds ensured that businesses, which were made up of individual community members, kept the best interests of the collective in mind. Loosened of these shackles, corporations are no longer collections of people from a community, but themselves industrious people blindly reaping profit.

Hence, these taxes must seek not only to raise revenue — though they will — but rather to create a business culture that accounts for extra material costs. In essence, they should aim to imbue a soul unto the soulless corporate persons who inhabit the global business landscape.

But why should this rearrangement stop at disincentivizing bad behavior? Don’t sticks work better when paired with carrots?

For businesses, creating value for customers is always rewarded. When a business is perceived as providing benefits for society, it is often rewarded by the market. Though this is not always the case — consider all the failed solar companies — it can be, as seen in the cases of Chipotle and Toms. When it sells a pair of shoes, Toms donates a pair. This is a selling point that helps attract customers. In the case of Chipotle, whose ingredients are organic, locally-grown and sustainably raised, the business is able to reap profits by going against the typical restaurant-chain protocol. In both these cases, it seems as if good behavior is rewarded to the extent that it is economically viable.

Apart from this, a deeper reason for only having disincentives via taxation is that our laws work the same way. People are expected not to cause others harm, but not to all be model citizens. In fact, the law builds in no special privileges for model citizens. Hence, in applying tax pressure upon the economy, the same principles should apply. We use financial consequences to enforce the principle of “do no harm” rather than the principle that everyone should be the ideal.

All that is to say we should pay more attention to taxes that internalize negative externalities so that we can attempt to protect national interests that go beyond the immediate and material.

Write Rohith at [email protected].