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How to avoid more oil spills? Abolish the payroll tax!

   /   Jul 8th, 2010Environment, Government, News

Sometimes you have to put two stories side by side to highlight the strange tradeoffs we make every day in a complex world.

Today, in the New York Times, for example, we find one story that chronicles how Transocean and BP have long pushed the limits on safe, and possibly legal, oil exploration (Owner of Exploded Rig Is Known for Testing Rules). This is all part of our society’s headlong rush to burn ever more fuel.

Industry analysts said that strong ties between the companies [BP and Transocean] reflected the fact that both had staked their financial futures on pushing oil exploration as far off shore as possible.

On the other hand, we read that our most vital natural resource – people – is now going dramatically underutilized, with millions unable to find work, and millions more who have given up looking. (American Dream is Elusive for a New Generation)

For young adults, the prospects in the workplace, even for the college-educated, have rarely been so bleak. Apart from the 14 percent who are unemployed and seeking work…23 percent are not even seeking a job, according to data from the Bureau of Labor Statistics. The total, 37 percent, is the highest in more than three decades and a rate reminiscent of the 1930s.

A saner society might put these problems together and say: Hey, why don’t we reorganize our economy so that it’s less oil-powered and more people-powered? As I remember from Econ. 101, there are only three “factors of production”: land (resources), labor and capital. If we cut back on one, we have to use more of the others. So how could we use fewer natural resources and put more people to work instead?

One solution that’s being advanced by a group called Get America Working is to reduce or abolish the payroll tax and replace it with higher taxes on natural resources. Payroll taxes raise the cost of labor, making it more difficult for companies to hire people. They consume 17 percent of salaries and hit low-income tax payers the hardest. Over the past 75 years, they’ve grown from 1 percent of federal revenues to almost 40 percent today.

Get America Working argues that abolishing the payroll tax and making up the lost revenues with taxes on, say, carbon or energy, could create 20 million new jobs, while encouraging employers “to make their methods of production less energy-intensive and more labor-intensive.” It notes that many leading economists on the left and right have endorsed this idea, and cites evidence that the strategy has boosted employment in Europe.

Environmentalists have been slow to link issues like global warming and the Gulf oil spill with unemployment. But in the midst of today’s recession, there may be a double opportunity in shifting the economy from land to labor. And the payroll tax may be the place to start.


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