Carbon taxes do not raise the social morale that democracies need to combat climate change. Taxes on billionaires do.

At the height of Greek naval warfare, Athens’ largest warships were captained by its wealthiest citizens. For these well-heeled officers known as trierarchs, being at the steer was the least onerous of their contributions. For a whole year, they would finance the ship’s outfitting and maintenance, a feat that could amount to eight times the annual income of an average Athenian. This was no philanthropy. It was the ancient democracy’s system of wealth taxes. It was its understanding that filling the ships’ hundreds of oars with free, voting citizens required a particularly strong social morale. Equitable distribution of war effort was at its center—conscribing the surplus wealth abounding in the city-state was politically and economically necessary.

Modern states faced a similar task during the world wars. Mass conscription required the cooperation of non-aristocratic classes, and thus the democratic franchise was everywhere extended. The United Kingdom, Belgium, and Italy were among the countries that implemented full male suffrage in 1917. The United States extended this political right to women. This democratic expansion, in turn, came with the political expectation that military conscription—a perceived tax in kind—needed to be matched by a ‘conscription on wealth’. Taxes on excess profits were implemented across belligerent nations. Fiscal restructuring and expansion, where income and profit taxes became a more substantial contribution to fiscal revenue, accompanied war efforts.

As world leaders gather next week in Glasgow for COP26, climate finance will be at the top of the agenda. Yet as this week’s events in American politics have shown, the toughest battles for funding may be happening on the home front. The urgency of addressing climate change, its existential threat to citizens, and the importance of government orchestration make for arguably strong similarities between war and climate finance. Unfortunately for governments’ ease, this includes the need for a strong social morale based on a just distribution of efforts. Nowhere will this be more disputed than in governments’ choices of fiscal instruments.

Economists have long argued for the supremacy of carbon taxes in the fight against climate change. They are a textbook example of the efficiency of markets in allocating scarce resources. Some suggest COP26 should be all about it. Yet it is not the first time that textbook economics forget about politics. The inherently regressive nature of carbon taxes—think 2018 gilets jaunes in France–make them unavoidably incompatible with the social morale necessary to gather broad support for climate policies. They are difficult to implement in democracies. Joe Biden’s presidency has yet to do so.

Admittedly, carbon taxes can be complemented with redistributive measures such as cash transfers to alleviate their effects on low-income households. Yet, when it comes to social morale, it may be the politically demoralizing effect of taxing, rather than the actual balance sheet, that has the strongest effect. Wealthy Athenians could have written an ancient form of a cheque to the government and left it to the city-state to manage the navy. Yet the state insisted on physically associating taxpayers with naval ships. It knew that in the politics of war taxation, form is often more powerful than quantity.

Taxes on billionaires, on the other hand, have enormous potential for raising social morale. The pandemic revealed new depths of inequality both within and across nations. Billionaires’ private jets and trips to space constantly remind the population of their inequitable contributions to emissions. A new generation of voters is eager to see the excess profits of the 1% be put towards averting environmental catastrophe. Democracies need strength and legitimacy to implement policies that will affect every aspect of the social fabric without a political backlash. Its absence will not only affect their political standing—it will derail essential efforts to fend off climate change.

There is a famous metaphor coined by Louis XIV’s finance minister that likens taxation to the plucking of a goose. The art of taxation, he says, consists of obtaining “the largest possible amount of feathers with the smallest possible amount of hissing.” Yet when the goose is already hissing—as with war or climate change—silent plucking is neither feasible nor politically desirable. As all eyes remain fixed on every single pluck, harvesting from the side with the most abundant feathers may be the only comfort to the people’s tense and vigilant stare.

This unpublished op-ed was written in October 2021, a week before COP26 in Glasgow. In the United States, Joe Biden was having difficulties gathering support for his infrastructure bill.