Everywhere around the globe economies are driven by growth.

The supply side is obviously interested in growth because it is what they do for a living: selling goods and services, as much as they possibly can. The demand side is eager to consume more and more. The Governments are more than happy to sponsor growth and increase tax collection.

If it were not for the global warming, this would be a positive scenario for all parts involved.

A NEW TAX STRUCTURE IS REQUIRED

For centuries income tax and value added type taxes have been the most popular ones.

With global warming becoming a real issue, taxes should be redesigned to align what humans do vis-à-vis its effect on the environment. Simply put, as the middle classes increase, more big and powerful cars are sold, larger and more comfortable houses are built, much more food per capta is consumed, and so on.

A new model is needed to stimulate the economies to the right direction.

A TAX ON WEIGHT

Let’s imagine that a tax on weight is created. Automatically, the supply side would re-engineer all products so as to reduce weight. This, in turn, would result in less use of natural resources. Cars would be a lot lighter, engines would consume less fuel, houses would be redesigned so as to use less material and all products would follow these new criteria because they would be too heavy; therefore, too expensive due to the new tax structure.

EXPECTATIONS

Tax on weight would stimulate all industries to come up with new solutions.

Cars, for instance, are one of the single most important sources of global warming.

In Sao Paulo, New York, London, Mexico City or Buenos Aires drivers use a 1- Ton car made to accommodate 4 or 5 people (though most of the time they are used by just 1), that has a fuel efficiency of about 30%. Cars should be a fraction in size and weight of what they are today. This measure alone would have a huge impact on the global warming.

The good news is that designing a small car is only an evolution. It is not a revolution by which the industry would have to come up with a totally new product.

THE CHALLENGES TO CHANGE

It may not be easy to make it happen but the tax on weight is a simple concept. An economic signal is needed to automatically drive the world to fewer emissions. A new paradigm has to be created: lean use of materials. The clock is ticking, the sooner, the better.

GNP growth may be achieved again with tax on weight. Products and services will have incorporated new technologies and fewer materials and they will, therefore, have more value. It is a very interesting challenge. A much needed one as well.

Comment: 

Taxation is not a "market signal", though it may be intended to "send a signal" to the market.

Nowhere in the US Constitution is there an enumerated power which authorizes the federal government to engage in behavior modification through taxation.

Interestingly, those who advocate taxation as the solution to problems rarely bother to mention what would be done with the tax revenues, as if that were an issue devoid of economic consequence.

Edward A. Reid, Jr.

And when taxation approaches 50% of GDP, it most definitely IS a "market signal", as is the spending which the governments do with it, as you point out.

Len Gould 

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