I'm A Member of the Pigovian Club.

Huh? The Pigovian Club is a group of economists who advocate Pigovian Taxes.

What's a Pigovian Tax? A Pigovian tax is "a tax levied to correct the negative externalities of a market activity. For instance, a Pigovian tax may be levied on producers who pollute the environment to encourage them to reduce pollution, and to provide revenue which may be used to counteract the negative effects of the pollution. Certain types of Pigovian taxes are sometimes referred to as sin taxes, for example taxes on alcohol and cigarettes."

Harvard Economist and former member of the Bush Administration's Countil of Economic Advisors, Greg Mankiw has started the Pigou Club. In October he published the club manifesto in the Wall Street Journal.

With the midterm election around the corner, here's a wacky idea you won't often hear from our elected leaders: We should raise the tax on gasoline. Not quickly, but substantially. I would like to see Congress increase the gas tax by $1 per gallon, phased in gradually by 10 cents per year over the next decade. Campaign consultants aren't fond of this kind of proposal, but policy wonks keep pushing for it.

Why raise the gas tax? Environmental benefits, road congestion relief, relief from other government regulations aimed at reducing consumption, and lastly, more revenue for the budget.

With this nasty cold I am not able to be in Des Moines right this minute presenting to our legislators my own Pigovian tax proposal to raise the state tax on regular gasoline to 50-cents per gallon within four years. Typical tax and spend Democrat you might say. Wrong, I say. You can download the undelivered draft of my position paper here, small PDF.

But this is the plan in a nutshell: The key concept here is what is called tax shifting. Instead of taxing people on how hard they work, we will shift the tax burden to tax how much they consume or waste. Those who consume or waste less, pay less. Thus...

1. Raise the tax on regular gas by increments from 21¢/gal. to 50¢/gal. in 2011.


2. Give each Iowan an income tax refund equal to the mean per captia gas usage of the state times the current gas tax. For example, if in 2011 the mean per capita gas usage is 813 gallons of gas, multiply by 50¢, equals a $406.50 income tax refund


3. Keep the fuel taxes on E85, ethanol blended gas, and biodiesel about half the tax on standard gas

That's it. Most of the legislators I have discussed this with agree that it is a very interesting and quite probably workable idea. What they can't do is bring themselves to vote for any kind of tax increase on gas. I think this is just a failure of imagination and courage. The tax waste, not work meme is tailor made for conservatives of either party to use to convince the people of the state that this sort of tax strategy is in their interests.