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Evaluating Policy Interventions for Consumption-Driven Environmental Strain
A government observes that the highly visible spending habits of its wealthiest citizens are creating a 'new normal' for desirable lifestyles, prompting widespread increases in work hours and general consumption across society. This has led to significant environmental degradation. Two policies are proposed to address this issue:
- Policy A: A high tax levied specifically on the top 1% of the most expensive luxury goods (e.g., supercars, yachts).
- Policy B: A progressive consumption tax, where the tax rate on an individual's total spending increases as their total consumption expenditure rises.
Which policy is likely to be more effective in mitigating the overall environmental strain caused by this societal trend? Justify your choice.
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Ch.3 Doing the best you can: Scarcity, wellbeing, and working hours - The Economy 2.0 Microeconomics @ CORE Econ
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Evaluating Policy Interventions for Consumption-Driven Environmental Strain