Social justice on the one hand demands that taxes be highest on those with the highest income. But practically speaking, there’s a limit to how high those tax rates can go. Those of us with ample capital and high incomes don’t need to live in London or anywhere specifically. We can move, and often do, when tax rates become punitive. Why make home where you have to give up 50% of the product of your work without anything in return? Better to move oneself and one’s capital to a location with more reasonable tax rates and high living standards.
Then again, by raising tax rates on high earners to punitive levels, they will leave the country. And without them society will be more equal. Goal achieved.
Perhaps the revenue neutral approach is not appropriate given our need to raise significant additional taxation in coming years, but in no way negates the point that a carbon tax can replace less socially beneficial taxes.
Lets say, for the sake of argument, that we are seeking to raise an additional £10bn/year in taxation. If we can raise that £10bn from a carbon tax, then this is £10bn that we do not need to raise from income tax. If we do not introduce a carbon tax, we will have to raise that £10bn elsewhere. Revenue-neutral or not, a carbon tax is essential to address our financial crisis and climate crisis at the same time.