Macron Can Prevent Riots by Return to Tax Drawing Board

French President Emmanuel Macron recently had to suspend his proposed fuel tax increases because people were rioting on a large scale. Some were even muttering dark threats of guillotines. Macron's mistake lay, not in the tax increases, but in the way he planned to use the resulting revenues.

The stated purpose of the tax increases, to be the first of a continuing series, was to reduce emission of the carbon dioxide driving global warming. The resulting higher fuel prices were intended to encourage people to drive less or to buy electric cars.

Taxing carbon dioxide emissions would certainly be an effective way to reduce those emissions. The problem in France, as in other places that have tried to impose carbon taxes, is not with this strategy, but with its political feasibility. The increased costs of fuels would fall most heavily on poor and middle class for whom energy costs are a substantial portion of their annual incomes.

In other words, a carbon tax, every thing else being equal, is highly regressive.

Leaders of the protests that turned into riots had a slogan which made total sense under the circumstances: "It's hard to talk about the end of the world while we are talking about the end of the month."

In other words, when a long term problem (possible runaway global warming) is addressed with measures creating huge short run problems for large numbers of people, we should not be surprised if they are very unhappy about it.

To make a carbon tax politically feasible requires making everything else not equal.

The key to avoiding riots would be to combine fuel tax increases with another policy that would eliminate their regressive impact.

This could be done by distributing all of the revenues raised by the taxes to the public as a social dividend — somewhat like the Alaskan oil dividend — paid equally to every man, woman, and child living in France.

The combined effect of more expensive fossil fuels together with the social dividend would be to increase slightly the purchasing power of most lower income people, whose dividends would be more than their extra costs for fuel and electricity.

Those very wealthy who use a lot of energy running their yachts, private jets, and McMansions, would find their purchasing power reduced, since their social dividend would be less than the extra money they're paying for fuel. For the average family, the extra energy cost and the social dividend would roughly cancel each other out.

Unfortunately, Macron's increased tax revenues were to be used to help balance the national budget.

Diana Johnstone, an American writer living in Paris, complains that "it is perfectly hypocritical to call the French gas tax an 'ecotax' since the returns from a genuine ecotax would be invested to develop clean energies — such as tidal power plants. Rather, the benefits are earmarked to balance the budget, that is, to serve the government debt."

However her proposed alternative use of the revenue would not make the fuel tax less regressive; it would still weigh most heavily on the poor.

If an initial proposed tax increase of about 11 (European) cents per gallon on gasoline, and about 25 cents per gallon on diesel is sufficient to spark large riots, one can only imagine what would happen when these taxes go up further, as was the original plan, and indeed as they should. 

Macron needs to go back to the drawing board, combine the current and future fuel tax increases with a social dividend that will distribute all of the resulting money equally to everyone in France, and then go out and sell this package deal to the French public.

Paul F. deLespinasse is Professor Emeritus of Political Science and Computer Science at Adrian College. He received his Ph.D. from Johns Hopkins University in 1966, and has been a National Merit Scholar, an NDEA Fellow, a Woodrow Wilson Fellow, and a Fellow in Law and Political Science at the Harvard Law School. His college textbook, "Thinking About Politics: American Government in Associational Perspective," was published in 1981 and his most recent book is "Beyond Capitalism: A Classless Society With (Mostly) Free Markets." His columns have appeared in newspapers in Michigan, Oregon, and a number of other states. To read more of his reports — Click Here Now.