Almost two months after the start of the new fiscal year, Beacon Hill is still stuck over the issue of taxes. But lost in the wrangling about how much the state should tax is a more important question: What should the state tax?

There are currently three major pots of revenue for the state and its cities and towns. The state income tax is by far the largest source, at more than $8 billion. Real estate (both residential and commercial/industrial) generates more than $6 billion, about two-thirds of which comes from taxes on homes. Sales taxes (including the meal tax) add another $3.3 billion. Together, they account for more than 80 percent of combined state and local revenues in the commonwealth.

It's not too much of a stretch to say that Massachusetts' governments get most of their money by taxing the American Dream. The lion's share of the tax dollars come from earning a living, owning a home, buying goods and services. However, instead of raising so much revenue by taxing things that people like and that society wants to encourage, why not tax things people don't like and that society should be discouraging? Tax the American Nightmare of pollution, global warming, and waste!

The state could raise much of the revenue it needs by taxing dirtier forms of energy, greenhouse gas emissions, sprawl development, toxic chemical pollution, and so on. The money generated by shifting our tax system to these environmental ''bads'' could be used to reduce the rate of taxation on such good things as work, home ownership, and savings.

For example, everyone who owns a car in Massachusetts now pays an excise tax every year. What if we repealed the auto excise tax and replaced it with a tax on gas-guzzling vehicles? Most people may need to have a car, but no one needs to drive one that isn't energy efficient. Those who choose to do so should pay more.

Making our tax system greener doesn't have to be only about taxing bads; it can also reward behavior that is good for the environment. If the state is indeed awash in surplus cash, why not enact a sizeable tax credit for homeowners who add insulation, switch to energy-efficient lighting or low-flow plumbing, or install solar panels?

Like much of the public policy debate in our country, discussions about taxes tend to degenerate into familiar and not especially enlightening tugs of war. ''Let the people keep more of their money.'' say the proponents of tax cuts. ''Don't give a windfall to a small group of the wealthiest citizens,'' say those who oppose further tax-cutting. Blah, blah, blah.

Polls say that people are not excited about the tax debates. Employment is high, the stock market is up, and previous tax cuts have made the issue less of a political third rail. But people might get excited about income taxes going down and pollution being taxed instead. It's likely that people would support a tax on cancer-causing chemicals if the proceeds were sent to the cities and towns to improve the schools.

Who would oppose an environmental tax shift? Those who pollute disporportionately and those who are so committed to the ''no new taxes'' sloganeering that they reject any creative approach to funding government, even revenue-neutral ones.

It isn't chiseled in stone that we must use the same old taxes in the same amounts to fund government. If our leaders could get beyond the tired debates about how much to tax and focus instead on what kinds of things we want to reward or discourage, Massachusetts could generate the revenues it needs and protect the environment at the same time. That's an agenda that a lot of people would support enthusiastically.

Jim Gomes is the president of the Environmental League of Massachusetts, an education and policy advocacy organization.

This story ran on page A17 of the Boston Globe on 08/30/99.