Green tax shift begins in Europe.

• Author: Roodman, David Malin

A modest but momentous change in taxing strategies is taking place across Western Europe. In the past five years, five European countries have cut income or payroll taxes while increasing taxes on energy use, waste generation, or pollution. More seem likely to follow.

Tax-shift proponents made their first gains in northern European countries, which have comparatively strong records on environmental protection - but which also have heavy tax burdens. The world's first tax shift was passed by the Swedish parliament in 1991. It reduced total income taxes by 4 percent. To pay for this reduction, the government instituted a variety of environmental charges, including taxes on sulfur dioxide emissions, which cause acid rain, and on carbon dioxide emissions, which contribute to the greenhouse effect.

Denmark followed its Nordic neighbor's lead in 1993 and 1995. It cut standard taxes by 3 percent and instituted levies on water use, pesticides, carbon emissions, and sales of batteries - resulting in a tax shift of 3 percent overall. The Netherlands followed suit late last year with a 0.7 percent tax shift from income to energy use. And in Germany, all but one of the major political parties have made environmental tax-shift proposals, though none have yet been enacted.

Tax shifting is also catching on in countries less known as environmental pioneers. Here, its great strength has been that it allows governments to cut the payroll taxes that fund social security programs - taxes that are thought to be contributing to high unemployment by increasing the cost of...