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Shifting
Tax
Burden to Polluters
Could Cut Taxes on Wages and Profits by 15%
With
Acknowledgments to Worldwatch (
research institute for a sustainable and just society.)
Increasing taxes on pollution and resource
use while lowering taxes on
income and wages is a powerful new tool for protecting the environment,
reports a new study from the Worldwatch Institute titled Getting the
Signals Right: Tax Reform to Protect the Environment and the Economy.
Such a tax shift could also create millions of jobs and boost living
standards of the working poor.
Countries
around the world are now experimenting with environmental
taxes, says the report, which documents how five nations have made
revenue-neutral "tax shifts," using the money from environmental taxes
to cut the conventional taxes that penalize work and investment.
Income Taxes kill Jobs, Prosperity
and Environment
"Today's tax codes are dangerously behind the times -- relics of an era
when we could ignore our economic dependence on the environment,"
Roodman says. "Air pollution prematurely ends the lives of over 300,000
people worldwide each year and causes chronic coughing in 50 million
children. But 90 percent of the world's $7.5 trillion yearly tax burden
is levied on work and investment, while less than 5 percent comes from
taxes on environmental harm."
More fully
taxing pollution could raise more than $1 trillion a year
worldwide, which could be used to cut taxes on wages and profits by up
to 15 percent -- leaving the total tax burden unchanged. Some
industries, such as coal mining, would lose, but others that do little
environmental harm, from computer software to recycling, would gain.
"Today,
environmental harm is often cheap or free to the people and
companies who cause it," Roodman notes. "For example, in the United
States, the unpaid costs to society of driving -- ranging from lung
disease to noise pollution -- are estimated at $218 billion per year.
Only if drivers begin to pay more of those costs can the problems
themselves ultimately be solved."
It no
longer makes economic sense to let people pollute the air we all
breathe or destroy ancient forests tax-free, while taxing our work and
investment in order to cope with the resulting environmental damage,
the report argues.
 "When governments turn the tables and tax
pollution and resource
depletion, the consumers who use polluting products must pay the price,
and in many cases will change
their behavior.
With such
taxes, governments can do what they do best -- set targets
for reducing environmental damage -- and markets can do what they do
best -- find the cheapest ways to hit those targets."
Thousands of
environmental taxes are on the books worldwide, but only a
small number are high enough to do much good. However, the number of
effective taxes has increased in recent years, some with an added
bonus: five European countries have linked environmental tax hikes to
cuts in income and wage taxes.
Pollutor Taxes proved their efficiency
worldwide
Among the examples of environmental taxes
cited in the Worldwatch
study:
In the Netherlands, taxes on
industrial emissions of heavy metals have
led to a reduction in the leakage of cadmium, copper, lead, mercury,
and zinc into canals and lakes by 86-97 percent since 1976 -- and made
the country a global leader in water pollution technologies.
Australia, Denmark, and the United
States used taxes on CFCs to help
phase out these chemicals -- as required under the 1987 Montreal
Protocol, the treaty to protect the ozone layer -- in less than a
decade. The U.S. tax has raised $4.1 billion.
In Sweden, air pollution taxes
helped reduce emissions of nitrogen
oxides -- which contribute to acid rain -- by 35 percent in just one
year.
Germany cut the production of
toxic wastes by 15 percent in just three years by using taxes.
Malaysia adjusted its motor
fuels taxes to make leaded gasoline more
expensive than unleaded, allowing unleaded fuel to grab more than 60
percent of the market.
"Tax
cuts can sweeten the sometimes bitter medicine of environmental
tax reform," Roodman notes. "In Europe, most environmental tax shifts
have been accompanied by reductions in payroll taxes, thus reducing the
cost of generating new jobs -- a high priority since unemployment in
the European Union currently stands at 11 percent." Recently, the
European Commission, the administrative arm of the European Union,
suggested that an EU-wide tax on carbon emissions and energy use be
dedicated to cutting payroll taxes, allowing an estimated 1.5 million
new jobs to be created.
Some governments have taken another
approach to harnessing the arket
for environmental gain. Instead of taxing environmental harm, they
auction or give away permits for pollution and resource depletion, then
allow businesses to trade the permits among themselves. Singapore has
used this approach to phase out CFCs. Among the other examples cited in
the report:
New Zealand now regulates most
of its fisheries with permit systems.
Overfishing has been reduced and many stocks appear to be rebuilding,
while the fishing industry remains profitable.
Facing water
shortages, Chile has used a permit system on water use to cap
consumption in some farming areas.
New Jersey has created tradable
development rights in the Pinelands, a
445,000-hectare region of wildlife habitat, berry farms, and small
towns that faces strong development pressures. These permits limit
total growth but give developers some flexibility in where to build.
Creating new Opportunities
Unlike most regulations, which set prescriptive standards,
environmental tax and permit systems put a price on pollution,
providing an ongoing stimulus for improvement without restricting
industries' and consumers' flexibility to respond.
Recent trends
suggest the scale of the new business opportunities: Sales of organic food in the United States
grew from $180 million in 1980 to $2.3 billion in 1994, a 13-fold
increase.
Global
windpower capacity has doubled in the last three years, and solar cell
sales doubled over the last six years.
The total
market for "environmental" goods and services that monitor
and control pollution, recycle, and conserve energy had risen to $408
billion by 1994, and is projected to reach $572 billion by 2001.
Environmental
tax and permit systems are likely to accelerate the
growth of these industries, and make the transition to an
environmentally sound economy more gradual and predictable. A carbon
tax, for example, could start low and then rise over 20 years, allowing
cars and factories to live out their useful lives and then be replaced
by less polluting models. Announcing such tax increases ahead of time
would send a powerful signal about an economy's direction, and
encourage businesses to plan ahead.
Social Corrections
Tax and permit systems are promising medicine, but are neither
cure-alls nor free of side effects. Drivers will not respond to a
gasoline tax by driving less, for example, unless good zoning laws and
mass transit systems provide them with alternative means of getting to
shopping and work. And pensioners living on fixed incomes, who lack the
funds to invest in energy conservation, could have their living
standards diminished by higher oil or electricity prices.
 Roodman recommends, therefore,
that tax and permit systems not be
applied puritanically. To protect low-income families, the coastal town
of Setubal, Portugal, for example, has "terraced" its new water taxes.
Households can buy 25 cubic meters a month tax-free, enough to meet
most basic needs; but above that threshold, a water tax begins to kick
in, rising progressively in three stages.
"Still,
environmental tax reform faces many political obstacles.
Businesses on the losing side of environmental tax shifts are often the
best financed and organized, and have successfully opposed increases in
energy taxes in the United States and other countries in recent years.
But environmental tax shifting creates more winners than losers, since
every cut in one person's taxes is a rise in someone else's, and we all
gain from a healthier environment."
The task for
environmental tax reformers is to build alliances to
create a winning majority. They can find common ground with labor
unions that favor wage tax cuts; with minimally polluting service
businesses that would receive more from reductions in current taxes
than they would pay in environmental taxes; and with vendors of
environmentally protective goods and services.
Polling data
from the United States and European Union show broad
support for environmental tax shifting. On both sides of the Atlantic,
70 percent of those surveyed have favored the change once they
understood it. The European Trade Union Confederation and the Union of
Industrial and Employers' Confederation of Europe have also endorsed
the idea.
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The Path To Sustainable Growth
Lessons
From 20 Years Growth Differentials In Europe
Martin De Vlieghere and Paul Vreymans
Abstract: While
the rest of the world is booming, Europe lags behind. Europe's
performance is weak in spite of high productivity and knowledge, high
level of development and good labour ethics. Growth is also remarkably
dissimular among regions. France, Germany and Italy are stagnating, and
so do Denmark, Sweden and Finland. All gained less than 44% prosperity
over the last 20 years. The Irish economy grew 4 times faster, gaining
169% wealth over the same period. In half a generation Ireland so
metamorphosed into Europe's second richest country creating jobs for
all.
" Big government " is the main cause of Europe's weak performance. The
oversized Public Sector lacks productivity and is undoing the entire
productivity gains of the Private Sector, eradicating all of its
outstanding performance and productiveness. Europe could improve its
overall performance by copying the Irish success formulas: Scaling down
Public Spending, downsizing bureaucracy, and shifting the tax burden
from income on consumption. This book demonstrates why the Lisbon
Agenda and decades of Keynesian inflationist demand stimulation have
failed. It devellops an alternative and workable supply-side strategy
as well as effective cures for a humane and financially sustainable
development.
This book reads as a step-by-step manual for economic
recovery. It is a data-reference for students and
politicians interested in growth, wellfare and in social
modelling. It is a classic for economists
concerned about Big Government, poor public sector
productivity and for parents worrying about their declining
standard of living and their children's future.
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Big
Public Spending
means
poor Growth.
Slow
Growth
results in Poverty.
These
are the key findings from our research
confirming the results of earlier
studies such as this
which compared the growth differentials of 30 OECD countries
over 45 years (
over 1000 data-pairs !!! )
Suggestions
and help welcome - Please give us a link on your webpage
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