We can be prosperous without being destructive

How can we be prosperous without being destructive?

It’s time for us to take off our ideological blinders and address this simple, yet crucial question for the 21st century.

I think there are answers. Economic growth can mean ecological improvement, not ecological destruction. A market system can be prosperous and sustainable. This is not an oxymoron.

Here’s a plan for sustainable prosperity based on the democratic adoption of new 21st century market rules.

The good news is that this will not be bad-tasting medicine. It will be easy for most of us, except for the most stubborn polluters, to swallow. The concept’s simple. End all taxes on income. Instead, tax pollution, depletion and ecological damage.

You make money. It’s yours. You want to buy a gas-guzzling SUV, feel free. But you’ll pay up the wazoo, first when you buy your Hummer, and then when you try to buy that gasoline, and yet again when you have to junk it instead of recycling and reusing. That new gas-sipping, carbon fiber hybrid will suddenly seem to be an awfully good bargain, as well as available in the latest designer styles.

In capsule summary, for markets to work sustainably, we need to get the prices right.

Replace income taxes with an ecological value added tax, or ecological VAT for short, a kind of smart sales tax on all goods and services when you buy. The higher the amount of pollution or depletion or ecological damage, the higher the tax rate on that good or service.

The $10 trillion national income represents the U.S. VAT tax base. A 20 percent average VAT would raise about $2 trillion a year for the federal budget. Over time, this ecological VAT would force the highest-polluting goods from the market. To maintain revenue, the VAT rate would rise on what used to be the moderately polluting items. Eventually an ecological VAT tax would become a flat tax for most now sustainable items with the remaining outlying polluting items taxed up the yin-yang.

And to be fair to the poor who’d pay higher consumption taxes, since they spend almost all their income while the rich don’t, we can institute a negative income tax. Do a year of national service and you’ll qualify for a negative income tax that would lift the poorest above the poverty line and the working poor toward the middle class.

Markets themselves are not the problem — the rules governing our current industrial market are. Existing market rules allow polluters not to pay or charge their true costs. We have ignored what markets do best — that is, the powerful relationship between price and demand that can be the primary instrument for sustainable prosperity.

It seems a wonkish question amid the warnings of looming climate catastrophe, peak oil induced economic collapse, habitat destruction and species extinction, with some suggesting that Homo sapiens may be added to that list.

All we need to do is get the prices right — not mandate technological marvels or apply a postal manual of regulations to all aspects of human behavior, or lay minefields along the borders and build a missile shields in the sky above.

Remember, since the end of World War II global carbon dioxide emissions actually declined only in 1974, and in 1980, 1981 and 1982. It wasn’t treaties or regulations. It was OPEC boycotts and subsequent price spikes that did the trick.

Get the prices right, and we won’t have to argue about the wisdom of the Kyoto Protocol. Make what is polluting, depleting and economically damaging more expensive and maybe we someday can say with a straight face, “I’m looking for bargains as part of my work to help to save the planet.” But making that happen is up to us.

Roy Morrison is the author of “Tax Pollution, Not Income” (essentialbooks.com). His next book “Ecological Civilization,” is forthcoming in 2005.

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