NCPA - National Center for Policy Analysis

Tax Reform Is Green, "Green" Taxes Aren't

January 2, 2001

According to George Pieler of the Competitive Enterprise Institute, the call for "green" taxes is an unfortunate turn of events for both tax and environmental policy. True tax reform itself, defined in terms of flattening rates and eliminating special tax favors, is a much sounder environmental policy than the highly-touted "tax reforms" environmental activists promote -- such as a "carbon tax" on energy consumption. Real tax reform, whether it takes the form of a flat-rate income tax, a simplified sales tax or a cash-flow tax that rewards investment over consumption, would have a profound ecological impact.

Real tax reform would:

  • Eliminate economic friction and waste caused by government interference in market decisions resulting in greater efficiency and less pollution.
  • Accelerate the turnover of capital stock by reducing the tax burden on new investment and savings, thereby bringing new energy-saving and less-polluting technologies to market much faster.
  • Boost economic growth overall, helping business and individuals generate new wealth, which is the sine qua non of dealing effectively with environmental problems either in the public or the private sector.

The greenest tax reform is that which does the most to reduce economic waste, encourage innovation and efficiency and spur economic growth. From this standpoint, it is clear that the only green tax reform is one that lowers and flattens tax rates on economic activity.

Source: George Pieler (adjunct fellow, CEI), "Tax Reform is Green, "Green" Taxes Aren't," October 2000, Competitive Enterprise Institute, 1001 Connecticut Avenue, N.W., Suite 1250, Washington, D.C. 20036, (202) 331-1010.


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