Think about how governments raise revenues. Often what is not taxed are activities that make the economy less productive by degrading our natural resources or by making people sick from breathing smog. The idea that governments should tax activities that are bad for us is not new. Environmental taxes fit the same bill. If we raised environmental taxes we could allow for significant cuts in income taxes, with the added advantage of increasing economic efficiency and promoting environmental protection at the same time.
Green taxes can encourage companies to use resources more efficiently and become more competitive.
By reducing waste, they can also reduce the need for costly infrastructure, such as water-treatment plants. Of course, no one nation can do this alone. But several countries, notably in northern Europe, have already started down this road. Germany, the Netherlands and various Scandinavian countries have begun to focus on the way in which tax policies discourage work, savings and investments. They are reducing some income and payroll taxes and increasing consumption taxes, including environmental taxes.