Green Economics Primer
Frank de Jong, et al.
[A document issued by the Green Party of Ontario,
Canada, October 2004. Additional authors: Mike Pilling, Kathie
Brosemer, Mike Schiner, Stewart Sinclair, Paul Charbonneau, Doug
Smith, Mark O'Brien, Rob Spring, John Fisher, Scott Vokey, Bill Hulet]
Preamble: There are two types of green economics: subsidy-driven
green economics and market-driven green economics. Greens gravitate to
market economics since it requires less government intervention and is
more politically palatable.
The market was originally theorized by Adam Smith to internalize all
costs in order to be fair and efficient. However, since businesses in
an industrial economy make money by externalizing costs, the business
lobby has influenced governments to establish policies and set rules
that enable business to externalize costs. This creates social,
economic and ecological inequities and inefficiencies.
Presently the market externalizes most ecological costs onto future
generations, the poor and other species. Greens seek to establish
policies that enable the market to once again reflect all costs. We
would modernize Adam Smith by employing the "green" hand to
establish markets that are transparent and democratic in order to
create a green society with minimal government subsidies or
Government shouldn't participate in the market but only regulate it.
For example, government should not build wind turbines. Rather,
government should eliminate the hidden subsidies for electricity
through full cost pricing, so that businesses and cooperatives will
respond to market indicators by building the turbines without
subsidies. The same goes for transit, organic agriculture, affordable
housing, energy conservation, ending sprawl, etc. When the market
reflects true costs, government subsidies are no longer needed.
Greens call for ecological fiscal reform and revenue-neutral green
tax shifting so that businesses that adopt green production processes
will increase their profits, and businesses that stay grey will be
taxed more heavily. Businesses should not be taxed for hiring people
or for making a reasonable profit. Instead, businesses should pay
levies and fees for squandering resources, using land inefficiently
and polluting the planet. People should not be taxed for holding down
a job, but we should pay for the amount of land, energy and resources
we use. Businesses and shoppers always follow the path of least tax
resistance and should be able to save money by choosing green products
and green lifestyles.
Land and natural resources are held in common by the pubic (and also
belong to future generations and other species). When the community
grants the privilege of using land or resources to a business or
individual, the community should be recompensed for this privilege.
Since the dynamism of a particular community or society determines the
value of local land and resources, individuals and businesses should
not be allowed to earn windfall profits off of these resources that
rightfully belong to that community. Land value taxation and resource
taxes insure that community-created wealth accrues back to the
community, except for a fair profit to the business or individual who,
through their labour or ingenuity, has improved the land or used the
GREEN ECONOMICS PRINCIPLES
1) It is better to tax "bads" rather than "goods".
Governments have long used selective taxation to discourage use of
alcohol and cigarettes, while food and clothing remain tax-free.
Greens would continue this tradition with selective "eco-sin
taxes" to discourage a wide range of grey products and
lifestyles. At the same time, taxes would be eliminated on green
products and lifestyles. People should be able to avoid taxation by
choosing green products and lifestyles.
2) Taxes should be designed to conserve resources and energy. Rather
than taxing jobs and profits, taxes should be moved to resource use
and energy consumption to reward conservation. The community should
benefit from the use of commonly held resources. Using resources is a
privilege, not a right, and the user should pay for the privilege.
Resources also belong to future generations and to other species.
3) Taxes should be designed to increase employment. Moving taxes onto
resources and land use and off of incomes will make people less
expensive to employ. Green products, which tend to use less resources
and energy and are designed to be reusable and repairable, will not be
taxed. This will encourage more employment since green products tend
to be more labour-intensive. As energy costs rise, the price of labour
becomes more economical, and green products which tend to encourage
value-added processes, will provide more high quality, skilled jobs
than resource intensive products.
4) Distributive taxes are preferable to re-distributive taxes. By
moving taxes off of consumption and on to resource use and land, the
poor will be taxed less, thus requiring less redistribution of wealth.
Taxing land, not the use of land, will reduce taxation on higher
density housing. This will reduce the costs of building high-density
housing and increase the amount of available affordable housing.
5) Resource taxes should be applied as early as possible. Resources
should be taxed before entering the manufacturing process in order to
green all aspects of the manufacturing process from extraction to the
finished product. Increasing taxes on resource and energy use will
encourage resource and energy efficiency, innovation, reuse, repair,
recycling, and used material recovery.
6) Taxing unearned income is preferable to taxing earned income. The
tax shift to resource use and community-generated land values will
distribute income more fairly without dependence on income and
business taxation to redistribute income. Taxing unearned income
(resources, land) and not earned income (jobs, profits) will reduce
the rich-poor gap since the rich are always in a better position to
capture unearned or windfall income by their ability to hold assets
that they do not have to consume.
7) Green tax shifting is revenue-neutral, not a tax break or tax
grab. The taxes paid by businesses and individuals collectively will
not change, but greener businesses and consumers will reduce their
taxes. Grey businesses and consumers will pay higher taxes. Studies
have shown that 50% of businesses and consumers will be unaffected or
only slightly affected by tax shifting, roughly one quarter will
realize tax reductions one quarter will be taxed more.
8) Resource use and community-generated land value taxation are
fairer. Resource use and land taxes are much simpler to collect and
harder to evade than taxes on income and business profits. Since there
are far fewer points of taxation than with traditional tax sources, a
move to resource use and land taxation will reduce the size of the
underground economy. The difficulty of evading these taxes will reduce
the problem of overseas tax havens.
9) Green taxation increases international competitiveness.
Eliminating taxes on domestic labour will reduce labour costs in
Ontario and therefore reduce out-sourcing by businesses seeking cheap
labour in other countries or provinces.
10) Pay for what you take, not for what you make. Businesses should
not be taxed for hiring people or for earning a profit, but should be
charged for using resources and polluting the planet. People should
not be taxed for earning an income or purchasing products but should
be charged for the value of land they own and the resources used in
the products they buy. Resource use and polluting are privileges not
rights, and businesses and consumers should pay for these privileges.
11) Taxing community-generated land values is beneficial. Since the
value of land is created by the community around it, not by its owner;
therefore, the community should receive the benefits it has created.
The owner is entitled to a fair profit but not to a windfall profit
that rightfully belongs to the community that generated the wealth in
the first place. Under LVT the specific use of the land will not be
taxed, only the land itself, within the existing zoning.
Community-generated land value taxation encourages the efficient use
of land, reduces sprawl, reduces speculation, tends to reduce land
prices and improves land use patterns.
12) Taxes should encourage local, sustainable, value-added production
over imports. Culturally unique products and services will be valued
by green tax reform over mass production. The sale price should
include the true costs of products, services and distances traveled,
and should be designed to encourage local, sustainable production.