Spare the Taxpayer, Spur the Economy, Save the Planet

OneWorld U.S. Home / Today's News - Spare the Taxpayer, Spur the Economy, Save the Planet: "Abid Aslam
OneWorld US
Fri., Apr. 14, 2006

WASHINGTON, D.C., Apr 13 (OneWorld) - As tax day looms, a prominent environmentalist is urging changes he says will spare the taxpayer, spur the economy, and save the planet.

''As Americans are filing their income taxes, many of their counterparts in several European countries are benefiting from a steady decline in income taxes as governments lower taxes on income and raise taxes on environmentally destructive activities,'' said Lester Brown, president of the Earth Policy Institute, a think tank here.

''It's time for the entire world to lower income taxes and raise environmental taxes.''

The practice of reducing income taxes while increasing levies for air, water, and soil pollution--has swept nations from Singapore to Sweden, said Brown, a pioneer in the merging of economics and ecology. He called it ''environmental tax shifting''; in many countries it also is referred to as environmental tax reform.

Regardless of the label, the practice ''usually brings a double dividend,'' he added. ''In reducing taxes on income--in effect, taxes on labor--labor becomes less costly, creating additional jobs while protecting the environment.''

That is what motivated Germany to shift taxes from income to energy, Brown said, adding that ''reducing the air pollution from smokestacks and tailpipes reduces the incidence of respiratory illnesses, such as asthma and emphysema, and thus overall health care costs.''

The idea of using taxes to discourage environmental destruction is not new. Singapore introduced a levy on cars entering the central business district more than two decades ago. The bid to curb gasoline use, air pollution, and traffic congestion succeeded and a number of cities eventually followed suit, among them Oslo, Melbourne, and London.

The idea of a broader, environmental overhaul of national tax codes began to catch on only a few years ago but is beginning to generate enthusiasm among public policy makers despite resistance from some businesses.

Germany and Sweden lead Western Europe in environmental tax reform. By 2001, a four-year plan adopted by Germany in 1999 had lowered fuel use by five percent, said Brown. It also accelerated growth in the renewable energy sector, creating some 45,400 jobs by 2003 in the wind industry alone. Brown, citing industry figures, said he expected the figure to rise to 103,000 new jobs by 2010.

In 2001, Sweden launched a 10-year environmental tax shift designed to convert some $3.9 billion of taxes from income to environmentally destructive activities. The average household has seen its income tax bill reduced by around $1,100.

That burden has not disappeared. Rather, it has shifted to vehicle and fuel taxes--a central plank of Sweden's plan to be free of oil use by 2025.

Other European countries embracing major tax changes of this sort include France, Italy, Norway, Spain, and the United Kingdom.

Japan and China, Asia's leading economies, are weighing possible taxes on carbon emissions, mostly released when oil, gasoline, and coal are burned and blamed by scientists for global warming.

Business opposition so far has stymied Japanese lawmakers' efforts to launch an environmental tax shift, Brown said.

China, he added, is pressing ahead because policymakers there are convinced that taxation is more effective than government regulation in influencing consumers' buying habits in a market economy.

Some 2,500 economists, including eight Nobel Prize winners, also have endorsed the concept of environmental tax shifts.

Harvard economist N. Gregory Mankiw wrote in Fortune magazine: ''Cutting income taxes while increasing gasoline taxes would lead to more rapid economic growth, less traffic congestion, safer roads, and reduced risk of global warming--all without jeopardizing long-term fiscal solvency. This may be the closest thing to a free lunch that economics has to offer.''

From Brown's vantage point, the purpose of all this tax shifting is to incorporate the environmental costs of products and services into their market prices or, in his words, ''to help the market tell the environmental truth.''

The result would be a system offering carrots to the environmentally responsible, whose income taxes fall and who can cut their environmental taxes by reducing the amount of garbage and pollution they generate.

The system also would brandish a hefty stick at polluters in the form of higher fuel costs, however.

Brown cited analysis by the International Center for Technology Assessment, a private research group that has said that the real cost of gasoline--including such indirect items as oil industry tax breaks, oil supply protection costs, oil industry subsidies, and health care costs of treating auto exhaust-related respiratory illnesses--amounts to about $9 per gallon.

Adding these external costs to the average price of gasoline in the United States would push the national average retail price today to around $11.70 per gallon--assuming consumers were expected to foot the entire bill without any sacrifice of profit by industry.

''For Americans, this is shockingly high,'' Brown acknowledged but added that gasoline is much cheaper in the U.S. than overseas.

British, French, German, and Italian drivers regularly pay around $6 per gallon for gasoline, he said.

However horrifying the prospect of higher pump prices might be to many Americans, environmentalists--including industry veterans--shudder at the possible consequences of not embracing ''green accounting.''

For Brown, the threat is aptly summarized in a quote from Oystein Dahle, a former vice president of Exxon for Norway and the North Sea.

''Socialism collapsed because it did not allow the market to tell the economic truth,'' Dahle said. ''Capitalism may collapse because it does not allow the market to tell the ecological truth.''