Each percentage point of Stuff Tax has been estimated to raise 0.4 percent of GDP, or $50 billion. A 20 percent Stuff Tax could therefore raise $1 trillion. That is equivalent to the income tax the federal government collects from all but 0.5 percent of Americans. Configured another way, a Stuff Tax would enable us to reduce employment tax by 50 percent, abolish income tax for 95 percent of Americans, and still come out ahead. Which do we value more, work or stuff?
Yes, a Stuff Tax would take a bite out of consumption initially. But that needs to happen anyway -- with consumption at 70 percent of GDP, we are completely addicted. Shifting taxes from production to consumption would help wean us from that addiction, spur new sectors of growth, and create a more diversified, and stable, national economy.
And the benefit to the environment? Creating stuff involves environmental costs- of extraction and pollution -- that are currently unaccounted for. Although it is a coarse tool, a Stuff Tax could acknowledge those externalities (similar to a Pigouvian Tax) and fund the appropriate mitigation. As we learn more, the Stuff Tax could be varied based on the impact that product or service has on the environment -- gas would carry a higher tax, for example, than birdseed.
A Stuff Tax will not solve all of our problems. But it would hold us all responsible for what we consume, encourage employment and nudge our economy in the right direction. Until then, Uncle Sam will keep earning his dime by taxing employment and work -- both the hairdresser who bikes to work and the hedge fund manager with two power boats and a private jet.
And that does not help our budget, our unemployed or our environment.
Stephen Linaweaver is an associate principal at GreenOrder, an LRN company. GreenOrder is a strategy and management consulting firm that helps companies achieve competitive advantage through environmental innovation. GreenOrder Senior Analyst Brad Bate contributed to this article.