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Promise and Contradiction:

A "green shift tax" offers the false promise that it will address current environmental concerns, and at the same time increase liberty.  It has even been suggested that it could even raise as much revenue as our current tax system.  The promises are false, and up until very recently, the Libertarian Party's platform explicitly opposed "all government conservation schemes through the use of  taxes, subsidies and regulation."

The basic idea is that certain things can be deemed "good" (to be
promoted) and others "bad" (non-green things such as "pollution"). While there seems to be an initial contradiction in that the advocates of a green shift tax recognize that "bad" activities include those that are not voluntary (i.e. taxes), and that they further recognize that taxes on voluntary enterprise reduces social well being, yet they rely on a tax (a "bad" thing).  Advocates of the green tax shift further seem to recognize that under our current system pollution and congestion are subsidized, but fail how to eliminate the subsidy.

Like the "fair-tax" advocates, the green tax promises to abolish taxes on wages, interest, dividends, transactions, and buildings.  The benefit of the elimination of intrusive tax audits and snooping into private financial affairs is also likewise promised.  To the extent that revenue neutrality is promised, the green tax advocates fall into the same pitfalls as the so-called "fairtax."

Public Goods Theory and Negative Externalities:

The green tax shift displays a reliance on "negative externalities" without recognizing that "externalities" are created by the failure to assign and protect property rights.  So-called "public goods theory" also plays a role, a general concept that is vague enough that almost any goods might in some sense be called public.  There is, however, an absence of recognition from the green shift advocates that the private sector can public goods efficiently, and that most of what the government produces is not a properly termed a public good.  There is no discussion of the over-extended notion that governmental institutions can be designed for the mutual benefit of "all" citizens.  Recall that the economists who write "mainstream" economics text books accept and promote public goods theory because, despite its anti-economic foundation as a positive theory of government action, its acceptance helps support the public sector.  The reality is that governments are generally imposed on some individuals by others, and governments  continue to hold their power by force, not agreement. No matter how much a person might actually agree with the goals and purposes of government, ultimately the government uses the threat of force to create compliance with government rules.

The green shift tax has no architecture to reveal consumer preferences, and any claim that a central planner can aggregate preferences of individuals in an accurate way is false.  Advocates of the green shift tax recognize we can't simply prohibit "pollution." But they err when imply it is possible to calculate a "pollution charge equal to the damages will reduce the output to the optimal amount," further suggesting that this would allow the harm and benefit are balanced, along with compensating society.  Perhaps they would just assume that the state has some god-like ability to divine such a calculation, but rational minds will see the folly of an elected official making such a determination, let alone any group of bureaucrats, large or small.

Notions that determinations regarding value of the reduction of "x" units of pollution in the absence of voluntary exchange are misplaced.  Any reliance upon the use of elegant comparative data or computational techniques to perform accurate and large-scale calculations to make such determinations as to the "optimal" anything can only result in an arbitrary result.  Any claim that such an assessment could possibly be a fairly exact science would be farcical, especially if such a calculation of societal harm is then claimed to be assignable on an individual basis.

Capital Formation, Tax Burdens and Subsidies:

Taxes, including "green" taxes,  not only decrease prosperity by harming capital formation, they also prevent a market adjustments from occurring as smoothly as they otherwise would.  A green tax, like any tax,  would distort profit signals and reduce the incentive to respond to such maladjustments.  As a tax that would punishes almost all productive human action, it would be fair to suggest that a "green" tax would have higher than average administration and compliance costs.  As the tax itself would be unjust, high administration costs would be assured, again making it difficult to collect the tax.

Tax burdens are shifted backwards in the production process and a portion of the burdens fall on the owners of capital, thereby reducing capital formation.  This reduction could be anticipated to be obvious to both industry and the public, and accordingly, a green shift tax would be quickly followed by a call for subsidies for chosen industries or business, bail-outs, or some other exceptions or other chicanery that can't be anticpated until after the tax is imposed. This type of releif would likely have to occur to keep certain industries profitable.

Dead Weight Losses and Excess Burden:

The green tax shift also makes the false promise (without explanation) that a green tax would eliminate dead weight losses and the excess burden in our current tax system.  There is a failure to recognize, however, that every tax system distorts economic decisions, alters economic behavior, and retards economic output, not to mention the extraction cost of taxation.  In contrast with the green tax, it is the private-sector production of public goods that has efficiency advantages over public-sector production, including the elimination of the excess burden of taxation.  I personally find it curious that the advocates of the "FairTax" make the same false claims about eliminating dead weight losses and excess burden.

Avoidance and Jurisdictional Issues:

It is only by discovering knowledge of the properties of natural resources and establishing command over them can the satisfaction of human needs occur.  The process of production represents a progression from goods more remote from the satisfaction of human needs and the source of the value of all goods, to goods less remote from the satisfaction of human needs.  That the green tax shift would edeavor to distinguish between the "good" and the "bad" in this progression, making errors along the way, the tax can only be viewed as an arbitrary penalty on efforts to satisfy human needs.  Accordingly, significant efforts to avoid the tax can be anticipated.

There are other obvious reasons the tax would be ineffectual in terms of its stated purpose, reducing "bad" pollution.  For example, there would be nothing to prevent a "bad" polluter from relocation the generator of the "bad" just outside of the jurisdiction imposing the tax (say, Mexico), thus avoiding the tax.  The pollution, however, would not be likely to constrain itself to Mexico, and the level of pollution drifting into the USA might be equal or greater than the pollution generated before the flight over the border.

Many Issues Ignored:

The promotion of a green tax does nothing to help define individual rights (property rights) or otherwise promote the development of an objective legal system defining property rights to air and water. Instead, it advances a collectivist attitude, and skims over how the determination of how much pollution is acceptable.  Will the EPA make those choices for us?  There is a failure to recognize that any such determinations will be arbitrary, and would likely expand the power of the EPA, not move us towards its abolition.

The green tax advocates fail to recognize the present legal system (particularly the unjust and false concept of "public property") block privatization of the use of the environment and hence block resolution of controversies over resource use.  Instead we need to modify the laws governing such torts as trespass and nuisance to cover damages done by air, water, radiation, and noise pollution.  The green tax shift advocates rely on the false notion that lawsuits are impractical to address pollution issues, or even that insurance can and should play an important roll in protecting property owners.  The advocates of the green tax are likely to suggest that the tax should actually be considered restitution and compensation for damages.

The  green shift tax seems to ignore abandoned property and the cost of clean up of any contaminated sites.  It would be a natural presumption that if it is pollution that is being taxed, the statue would assume some corresponding duty to clean up pollution.  A better position is rather than making taxpayers pay for toxic waste clean-ups, individual property owners, or in the case of corporations, the responsible managers and employees should be held strictly liable for material damage done by their property.  Indeed toxic waste disposal problems have been created by government policies that separate liability from property.  Advocates of the green tax fail to condemn the EPA's taxing powers which are used to penalize all chemical firms, regardless of their conduct.  There is no justification for subsidies of subsidy of irresponsible companies at the expense of responsible ones.

The green shift tax seems to ignore that resource management is properly the responsibility and right of the legitimate owners of land, water and other natural resources.  A green tax would not repair the damage done by the government regulation of the energy industry, including in high prices, shortages, lack of competition, stunted exploration and development of alternative energy sources, and displaced responsibility for wrongdoing in the energy markets.  A green tax would grant advantage in existing markets to those with political access, and fails to address the problem of environmental damage caused by the governments activities.

Due to impact of the green tax, it is likely the public would increase its demands for government subsidies for energy research, development, and operation.  The impact on the prices of would likely result in greater requests for government control of energy pricing, allocation, and production, along with an expansion of the authority and power of the Department of Energy, state public utility commissions, and state agencies.  The green tax would move us further away from the creation of a free market in oil by instituting full property rights in underground oil and by the repeal of all government controls over output in the petroleum industry.  A green tax would do nothing to move us closer to the day government-owned energy resources are turned over to private ownership.

Advocates of the green tax fail to address that nuclear energy should be denationalized and the industry's assets transferred to the private sector, and a green shift seems inconsistent with the notion that we should oppose direct and indirect government participation in the nuclear energy industry, including subsidies, research and development funds, guaranteed loans, waste disposal subsidies, and federal uranium enrichment facilities.

The green tax also ignores the government restrictions upon private use or voluntary transfer of water rights that have aggravated the mis-allocation of water.  There is a failure to recognize that the allocation of water should be governed by unrestricted competition and unregulated prices.

A Move towards Liberty or Totalitarianism?

The green shift tax sets the stage with capitalists and entrepreneurs on the one hand and the victims of pollution on the other, with the government as an impartial arbiter, suggesting it is possible to dethrone the moloch capitalism without enthroning the moloch of totalitarian socialism.  The antagonism, however, is not a dispute about "saving" the earth, it is a controversy about which of  two schemes for society's economic organization, capitalism or socialism, will bring the best possible supply of useful commodities and services.  If we abandon private enterprise and initiative, subject to the supremacy of the public's buying and abstention from buying on the market, we will be left only with a central authority planning for individuals.

The conflict of the two principles is irreconcilable and does not allow for any compromise. Control is indivisible.  Either the consumers' demand as manifested on the market decides for what purposes and how the factors of production should be employed, or the government takes care of these matters. There is nothing that could mitigate the opposition between these two contradictory principles. They preclude each other.  A well intentioned green tax is not a golden mean between  capitalism and socialism.

The advocates of a green tax will emphasize that they plan to retain private ownership of the means of production, entrepreneurship and market exchange.  But, they must necessarily claim it is necessary for the state to step in on a peremptory basis to prevent the wrong kind of changes to the environment.  They'd say it is the duty of government to restrain, by arbitrary standards and taxes, the greed and irresponsibility of human race lest destroy the earth, and that unhampered or laissez-faire capitalism and the "pollution" it creates is an evil. But in a suble twist they'd say in order to eliminate its evils, there is no need to abolish capitalism entirely, but instead it is possible to improve the capitalist system by their special brand governmental interference.

They'd have us believe that a green tax along with its government regulation and regimentation of business is the only method to keep off totalitarian socialism and to salvage those features of capitalism which are worth preserving.  In reality there is no limitation as to what harms might be sought to be remedied or what means might be justified under such a scheme.

Under a green shift regieme no longer do the citizens by their buying and abstention from buying determine what should be produced and how. The power to decide these matters will be devolved upon the government. This is no longer capitalism; it is all-around planning by the government, it is socialism.  It is, of course, true that this type of socialism preserves some of the labels and the outward appearance of capitalism. It maintains, seemingly and nominally, private ownership of the means of production, prices, wages, interest rates and profits. In fact, however, nothing counts but the government's unrestricted autocracy.  The interventionism of a green tax cannot be considered as part of an economic system destined to stay.  It is a method for the transformation of capitalism into socialism by a series of successive steps.

Like the method of the Hindenburg plan, the original German pattern of the welfare state and central planning, a green shift tax would eventually forces every firm and every individual to comply strictly with the orders issued by the government's central board of "pollution" management.  Such was the intention of the National Industrial Recovery Act of 1933 and any other idea implied in the endeavors to substitute planning for private enterprise.

Conclusion:

Libertarians may think they have been successful when they have delayed for some time an especially ruinous measure, but they are
always in retreat.   We put up today with measures which only ten or
twenty years ago we would have considered as undiscussable.  In a few more years we will acquiesce in other measures which they today consider as simply out of the question. What can prevent the coming of totalitarian socialism is only a thorough change in ideologies. What we need is neither anti-socialism nor anti-communism but an open positive endorsement of that system to which we owe all our wealth.

If environmental harms can be substantially limited by market forces, it is ill advised to suggest that the iron fist of government can accurately strike the enemies of the environment.  While lawsuits and insurance from such suits may be last element of a libertarian solution to environmental problems, not the first, it still must be recognized that the first element is the elimination of environmental harms by the government itself, the subsidies that result in too many cars and highways, regulations that ban efficient vehicles and alternate modes of transportation (most in the name of "safety"), and the robbing of the earth's un-owned resources that could be owned, such as reserves of fossil fuels.  Until we break from the "standard economics text book" brain-washing of externalities as legitimate justification for governmental intervention, we will continue to rely on our faith that the all-knowing and all-powerful state will solve our problems, all while forgetting that elected officials and bureaucrats are just normal people, and suffer from earthly motivations, including rational efforts to maximize their wealth while minimizing effort.

Careful consideration of a green tax leads me to question whether it is even consistent with the notion that a person can actually "own" anything.  Even decentralized implementation would fail to remedy any of the shortcomings of a green tax.  Libertarians should not advocate or otherwise support a green shift tax, but it should be left to those who advocate other statist policies.

Daniel Grow is Libertarian Candidate for Michigan's First Congressional District Seat