A letter to Peter Costello

We have a tax reform coming up in Australia. This is a significant opportunity for us to deal with greenhouse emissions, water usage etc. Please read this letter I just submitted, and submit one of your own: http://www.treasury.gov.au/ministerial.asp

Dr Mr Costello

re: Tax reform

I support moves to reduce the total tax burden on Australia. I would like you to introduce a Green Tax Shift with the upcoming tax reform and also take the opportunity to remove damaging subsidies.

As per the philosophy behind a green tax shift, the income from these taxes should be offset by reduction in income and other taxes. Failing to tax a negative externality such as CO2 emissions is an effective subsidy as society must bear the costs associated with the emissions. Thus green taxes represent no net burden to the economy as they are removing an effective subsidy. The opportunity they present for reducing taxes on environmentally and socially benign activities – such as employment – represent a huge and underappreciated lost potential. A green tax shift can be implemented alongside whatever reform option you choose.

A green tax shift is preferable to a carbon trading scheme in which emissions rights are given away for free. This implies that industry has the right to pollute and we do not have the right to clean air. Giving away these rights for free would be a huge subsidy and a huge loss to society. Furthermore, they should be rented in the form of a tax instead of sold. This is the only way to keep a mechanism for changing emissions levels as we get a better understanding of the greenhouse effect. State governments made a mistake when they gave away commercial fishing rights last century and society is now having to pay to buy them back.

Most Australians support efforts to reduce greenhouse emissions. However, far fewer are prepared to do so on their own accord at significant personal expense while still putting up with emissions from other people. We are all in this together and a green tax shift allows everyone to adjust their lifestyle as is necessary. Furthermore a green tax shift is the only way of enabling consumers to find out the true cost of all products they purchase and is the most economically efficient way to reduce emissions.

Damaging subsidies, such as all subsidies to fossil fuel industries and farming should be abolished – including drought relief. No established industries or technologies should receive subsidies.

Petrol and diesel taxes should cover the full cost of road construction and maintenance. Petrol consumption is the best indicator of wear and damage to roads. Petrol taxes should replace ‘fixed charges’ such as vehicle registration and licence fees.

In addition, petrol should be taxed at a rate high enough to get consumers to consider the negative impact of CO2 emissions to society. This will not only affect consumers at the bowser, but will also make the price of all goods reflect the true cost to society of emissions. CO2 emissions at power plants and factories should be charged at an equivalent rate. Beef production should also be taxed according to the emissions produced by cattle. This can be refunded for exported beef until our competitors do the same.

Water should be charged for at the same rate across whole catchment areas. Farmers, householders and industry should be charged the same amount. The price should be increased enough to restore significant natural flows to our waterways. The recreational and environmental value, and the value to our fisheries of healthy flows should be taken into account.

The tax on tobacco should be doubled. The tax on alcohol should be increased if consumption is still relatively inelastic to price. Marijuana should be legalised and regulated like tobacco, and taxed to buggery.