The idea of tax shifting has been around, and used successfully, for a long time.  Lester Brown is the founder and President of the Earth Policy Institute.  As detailed in an article on Grinning Planet, Lester provides many reasons why we need a tax shift in the U.S.  Copied below are some key points from the article -- click here for the full article.

"The United States imposed a stiff tax on chlorofluorocarbons to phase them out in accordance with the Montreal Protocol of 1987."  There is a precedent in the U.S. where taxes were raised to account for the full environmental costs of a product.  Note that in a tax shift, the tax amount going to the government remains the same.  Taxes go up on products for which prices do not internalize (account for) all of the product's costs; another tax, say income, goes down to keep revenue to the government constant.  (yippee)

"Environmental tax shifting usually brings a double dividend. In reducing taxes on income--in effect, taxes on labor--labor becomes less costly, creating additional jobs while protecting the environment."  Makes sense to me.

"Some 2,500 economists, including eight Nobel Prize winners in economics, have endorsed the concept of tax shifts."  So why is there no action on this in the U.S.?  Lack of political will.  It's going to have to be driven by citizens.  At this point I'll settle for discussion of a tax shift.

"In Europe and the United States, polls indicate that at least 70 percent of voters support environmental tax reform once it is explained to them."  A wonderful statistic - thanks Lester.

"Subsidies, which are essentially 'negative taxes,' also must be reformed. Each year the world's taxpayers underwrite $700 billion of subsidies for environmentally destructive activities,  such as burning fossil fuels, over-pumping aquifers, clear-cutting forests, and overfishing."   Agree - subsidies on environmentally destructive activities should be eliminated.  Regarding subsidies as a tool to benefit the environment: reduce them significantly and let the market decide.  Do we really want to be taxed more so that the federal government can give $ to specific companies and specific industries?