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Celebrating Earth Day — By Cutting Taxes

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4/18/00 10:00 a.m.
Celebrating Earth Day — By Cutting Taxes
Saving the green.

By Jonathan H. Adler, Senior Fellow, Competitive Enterprise Institute

very year around this time Republicans search frantically for symbolic environmental legislation to enact so as to demonstrate their green environmental bona fides on April 22, Earth Day. Usually this means that Republicans endorse new government programs or increased spending for some environmental matter that would never receive their support at any other time. This year, thankfully, Congress left for the Easter recess without falling prey to such temptations. Unfortunately, they also missed an opportunity to enact symbolic measures that advance conservative principles and support environmental conservation.

The problem with most Earth Day enactments is that they accept the premise that the best — if not only — way to advance environmental protection is to increase the size and scope of the federal government. Nothing could be further from the truth. Uncle Sam is America's greatest polluter, and federal programs subsidize or exacerbate most of the environmental problems that federal environmental regulations are designed to address. Shrinking the size of government by cutting wasteful spending, eliminating regulatory obstacles to technological innovation, and even cutting taxes would enhance environmental protection.

One of the simplest ways to promote conservation by cutting the size of government would be to kill the death tax. The estate tax accounts for less than two percent of tax receipts on an annual basis. Yet this little levy is a leading cause of the destruction of family farms and small businesses; it also contributes to the development environmental activists label "sprawl," by forcing landowners to develop previously undisturbed land. For many landowners, if land is not developed at the time of inheritance, it will be soon thereafter. Many rural landowners faced with a death-tax levy of up to 55 percent find that subdividing or developing their land is the only way to pay Uncle Sam.

"If estate taxes were not assessed by the government, thousands of acres OF privately owned land would be protected from development," according to wildlife biologist Dennis "Duke" Hammond, who fears that death-tax-driven development may drive the Florida Panther to extinction. Michael Bean of Environmental Defense agrees that the estate tax "encourages the destruction of ecologically important land in private ownership." As some 75 percent of endangered species rely upon private land for some or all of their habitat, the aggregate impact of the estate tax on conservation could be quite severe.

Estate-tax repeal is not the only possible environmental tax cut. The current tax treatment of capital investment has anti-environmental effects too. The so-called "capital wedge" slows the natural turnover of equipment and capital stock through which improvements in efficiency and environmental performance are deployed. Competitive pressures in the marketplace ensure that newer, cleaner technologies of tomorrow replace the older, dirtier technologies of yesterday and today, but the current tax code slows this process, increasing the consumption of resources and generation of waste. "Making the tax system less of a burden on saving, investment and capital formation is probably the 'greenest' thing we could do in tax policy," according to George Pieler, author of a forthcoming study on the environmental benefits of fundamental tax reform.

Earth Day comes only a week after taxes are due, so the burdens of taxes are fresh on Americans' minds. What better time to spread the word that tax cutters have green thumbs. To celebrate Earth Day, Republicans should cut taxes.

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