The Case for Taxing Away Unsustainable Profits

Abstract

When businesses offload environmental and social costs on the public, their profits are windfalls extracted from current and future taxpayers. Traditional regulatory and tax remedies have failed to eliminate this profiteering. To prevent some from receiving windfalls while everyone else bears the cost, unsustainable profits should be taxed away. A novel way to do so is emerging with the development of advanced tools for measuring environmental and social damage. Mobilized through the income tax, these tools could be used to design a cutting-edge windfall tax on unsustainable profits. This Article makes the normative and practical case for doing so.

See the elevator pitch for the initial idea for this paper in Tax Papers Unlocked by Break Into Tax here: https://youtu.be/1ei-C4wYBvw.

Keywords: taxation, life-cycle assessment, environmental externalities, economic rent, windfalls, cost savings, carbon pricing, pandemic, COVID-19

JEL Classification: D63, D78, E62, F23, F42, H20, H25, H87, K33, K34, O19, O34, O38