Air Date: Week of April 3, 1998

Since April 15th is just a short time away now, folks who owe state and federal income taxes are getting ready to shell out. But according to author Alan Durning, there could be another way. Mr. Durning is co-author of "Tax Shift: How to Help the Economy, Improve the Environment, and Get the Tax Man Off Our Backs." He wants to overhaul our tax code, and instead of collecting a portion of our payroll and income, he says the government should tax environmental pollution and the depletion of natural resources.

Transcript

CURWOOD: It's Living on Earth. I'm Steve Curwood. April 15th is just a short time away, now, and folks who owe income taxes are getting ready to shell out. But there could be another way. We're joined now by Alan Durning, coauthor of Tax Shift: How to Help the Economy, Improve the Environment, and Get the Tax Man Off our Backs. Mr. Durning wants to overhaul our tax code. Instead of collecting a portion of our payroll and income, he says the government should tax environmental pollution and the depletion of natural resources.

DURNING: The concept of shifting taxes comes not from environmental extremists but from mainstream economics. They say that the current tax system, because it penalizes us for working, for investing, for starting businesses, hiring workers, all the things that make our economy grow, it actually discourages those activities. But if we shifted our tax system onto environmental bads like pollution and natural resource depletion, we would discourage stuff we want less of and encourage things we want more of.

CURWOOD: Okay. Now, wouldn't it create an incentive, though, for the government to say keep pollution around so we can get more in the way of taxes?

DURNING: I suppose there's a slight chance that's true. You could look at the case of the US Forest Service, which because it generates a share of its revenue from selling timber has, at least in the eyes of conservationists, appeared oriented toward timber sales rather than all the other uses of public land. But you can also look at cigarette taxes, for example, and I see no compelling evidence that cigarette taxes have put the government in the business of encouraging smoking. So, there is a slight danger that you might have some strange action from government agencies. But overall, I think what we would see is that our conscience and our pocketbooks would be telling us to do the same things.

CURWOOD: Now, a few countries in Europe have implemented environmental taxes. Have they worked?

DURNING: They have. Six European countries have begun, gradually, to shift some taxes off of work onto taxes on greenhouse gases and some major air pollutants. The largest of these tax shifts in Denmark, I believe, has shifted about 2-and-a-half percent of government revenue from taxes on labor to taxes on pollution. At that level, you can already start to see the impacts in the reduction and resource use and a greater emphasis on hiring workers. I think we could afford to do a much larger tax shift. I mean, environmental economists have been saying for years that consumer prices don't tell the truth, that what you pay for a gallon of gasoline doesn't reflect the environmental costs of drilling it out of the ground and burning it in your car. And so, all we tried to do here was to make rough and very conservative estimates of what those costs might be, and assume taxes that reflected those costs. So we taxed the environmental damage roughly in proportion to its economic costs, and when we did it we came up with plenty of revenue: enough to eliminate state-level business taxes, sales taxes, and much of the personal income taxes at the state level.

CURWOOD: Okay. If we do what you're talking about, Alan Durning, what happens to the average person's tax bill? Goes up? Stays the same? Goes down?

DURNING: A typical middle-class family would see a small reduction in their taxes overall from an environmental tax shift. But it's going to vary a lot depending on their lifestyle and their habits. If it's someone who has an exceptionally long commute, then the increased taxes that will affect driving will offset the reductions in their income and payroll taxes.

CURWOOD: Now, what about poor people, though? If you tax something like gasoline, everybody poor who's working, they're going to pay more. How are you going to compensate for that?

DURNING: There are some of the environmental taxes that are pretty tough on the poor. Gas taxes are pretty hard on poor families who need to drive to get to work, particularly poor families that live in suburban or rural areas. So it would be important to offer rebates for low-income families for those of the environmental taxes that are regressive. Others of the environmental taxes, taxes on pollution coming from major factories, for example, that are quite progressive in their impacts -- that means they hit high-income families much harder than low-income families.

CURWOOD: Now, Alan, people don't always act in economically rational ways. We drive huge cars, one person, pay a lot of money for it. There are things that we could get cheaper or more efficiently that we just simply choose not to. How can you convince people to switch over to your plan when everyone grumbles about it but seems pretty comfortable with the present arrangement?

DURNING: It's the devil we know, and environmental taxes are the devil we don't know. So I think the largest challenge for me and for others who are promoting the dramatic transformation of our tax system is to stimulate a broad discussion among citizens, among policy makers, about what we tax, instead of this relentless discussion about how much we tax. You know, the personal income tax that largely funds Federal government today was introduced by the populist movement late in the last century, who were regarded as wild-eyed schemers and dreamers, and that no, you could never fund the government from a personal income tax, you have to fund it from customs duties charged on traded goods, as was then the case. And I think that small environmental taxes that have already been introduced -- the tax on chlorofluorocarbons, for example, permit tradings for sulfur dioxide introduced in the Clean Air Act amendments of 1990 -- these may be the predecessors of major revenue sources a generation from now.

CURWOOD: Alan Durning is coauthor of Tax Shift: How to Help the Economy, Improve the Environment and Get the Tax Man Off our Backs. Thanks for joining us, Alan.

DURNING: Thanks for having me, Steve.