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Getting the Signals Right: Tax Reform to Protect the Environment and the Economy

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Progress on major enviromental issues, such as global warming, will be nearly impossible until the world's governments begin to tax activities that cause the problems. Today, enviromental harm often seems free even though it imposes real costs on this and future generations. Enviromental taxes pass these hidden caosts back to the people who cause them. And unlike most regulations, which set minimum standards, they create a steady prod for the development of enviromentally sound techniques and products.

Fully exploited, such taxes could also raise a trillion dollars of more a year in coming decades, allowing for an approximately 20 percent cut in conventional taxes on work and investment. Since total taxation could stay the same, governments would be protecting the enviroment without hurting economies even in the short term. Indeed, properly targeted, the tax cuts could reduce problems such as high unemployment and falling wages.

Turning enviromental tax theory into practice, however, raises a host of policy and political issues. Supporters of change will need to think about effects on everyone from pensioners with already-high heating bills to workers and investors in the coal industry. Fortunately, enviromental tax shifting creates more winners than losers, since every cut in one person's taxes is a rise in someone else's, and everyone gains from a healthier enviroment. The challenge is to educate the public and build effective coalitions among potential winners. -- from book's back cover.