Rethinking Lifestyle

In my last post I suggested that a tax on fertilizer would serve us all well. Specifically I suggested that such a tax would effectively increase the value of manure fertilizer, thereby creating an incentive for farmers to place a greater value of the plant nutrients in their manure. Also, I suggested that extracting resources from the earth impoverishes the planet. Reasonably, we should not think we have the right to do this without considering the impact such impoverishment has on future generations.

Governments need revenue to maintain our infrastructure, maintain law and order, deliver health services and educate our children. They gain that revenue through taxes. But we don’t like taxes. Surely then, it makes much more sense to tax activities that impoverish future generations than to tax income. Specifically, last week, I suggested we tax fertilizer.

But, we can all hear farmers saying “That’s not fair. A tax on fertilizer will significantly increase our costs. We cannot pass this cost on, which means that ultimately we will go broke.” I think this is a very important consideration and needs to be taken seriously. So how do we address it?

Like they say: Carefully! Before I go on, let me clarify one thing. This is not an essay about a comprehensive tax policy. Tax policy is complex. The point I am trying to make is that regulation (which costs taxpayers money) is not the only way to encourage practice that is good for all of us. Taxation can also encourage desirable behaviour.

I think we do not want a tax to be a tax on farming – we don’t want farmers going out of business because of this tax. Nevertheless we want to change the behaviour of farmers – with the tax. If we wish to mitigate the effect of a tax on fertilizer on farmers, we need to bear in mind what our goal is: our goal is not to increase tax revenue, our goal is to alter farmer’s behaviour. We want to increase the price of fertilizer for a reason: so farmers will place a greater value on the fertilizer in animal manure.

So we increase the cost of fertilizer, thereby increasing the farmers input costs. So what activity do we want to reward? Under what circumstances should this revenue collected be returned to the farmer? With a bit of head scratching we could all think of some creative way. I will just discuss one. We could lower the tax on land. (I am not suggesting that this is the best way to offset this resource tax. There may be better ways. But this allows me to make a point.) In Canada the prime source of income for municipalities is the land tax. Why not simply lower the tax on farm land by the amount of tax collected through this fertilizer levy? If we do this, the amount of money in the agricultural sector remains the same. Of course there would be winners and losers. The winners would be farmers who do not buy a lot of fertilizer, either because they have access to livestock manure or they are in the habit of growing green manure fertilizer. The losers would be farmers who depend entirely on chemical fertilizer to boost their yields.

Such a tax shift, from land tax to fertilizer use tax, would result in a farm practice shift to more careful use of livestock manure and greater interest in more natural ways of maintaining field fertility. An additional benefit would be less pollution of our waterways with runoff plant nutrients and a more habitable planet for future generations.