Letter to Wall Street Journal editor
Sent April 21, 2009 (not published)
Green Tax Shift Would Improve US Competitiveness
Lance McKee
Let's restore US competitiveness! Given the current economy, it's time to stop penalizing work and investment. That is, it's time to phase out taxes on earned income and capital gains. Instead, let's tax pollution (including CO2 emissions) and tax extraction of non-renewable natural resources.
I used to think this "tax shifting" could only be effective through international agreements. Now I am convinced that freeing US citizens from taxes on their earned income and capital gains would make the US so superior in competitiveness -- particularly in a world hungry for innovative and affordable clean energy and "green" products and services -- that other countries would have to make the same tax shift to keep up with us. Thus we would not only restore our financial security and world leadership but also solve the climate problem, reverse the accumulation of mercury in fish, improve public health, etc.
Let's have our government tax the bad things we do, not the good things. Like paying off the national debt, it's about the future: Let's reward the creation of value that aggregates to the benefit of future generations and disincentivize value destruction that diminishes the lives of future generations.
The politics of tax policy would thus shift to a politics of sustainability. This would be a noisy but healthy debate, a vigorous and ongoing refinement of our interest in the long-term human project. We would debate, for example, how to balance "value added to ores" against the exploitation of natural capital that, if left in its natural state, would remain the "common wealth" of future generations.
Another giant step forward might follow logically from tax shifting: The US dollar shouldn't be based on debt -- that is, "the full faith and credit of the U.S. government" -- as it is now so precariously based. (And the dollar shouldn't be based indirectly on oil: Iran's Oil Bourse is ending the era in which all the world's main oil markets were dollar-denominated.) By our principles above, the dollar should be based on a basket of "green" commodities. Increasing the value of these commodities would increase the value of the dollar.
How might our competitors respond to this challenge? They could set up an international consensus process to determine and continually adjust what's in their shared currency's basket of commodities, and enlist so many nations to the new EarthDollar consensus that we would eventually have to join. We could, of course, pre-empt such an EarthYaunEuroPesoRupee by creating a consensus process that would make it attractive for other nations to adopt our green US dollar as their currency.
I think of capitalism as a life force, like the life force in healthy human tissue -- or in a cancer. The current economic mess reminds us that capitalism needs a guiding framework if it is to serve individuals and society. In a healthy capitalist society with a wise framework of laws and taxes, people are motivated to work and motivated to invest in themselves and in businesses. There is every reason for us to design that framework so it also preserves "natural capital" for future generations.