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Because if taxes were paid on energy instead of on income, you would see energy prices really go through the roof. Also, goods and services that rely on energy consumption would also skyrocket. But to counterbalance that, you would have no income taxes. In other words, you would have more money in your wallet to pay for all the expensive shit.
Then, since everything is expensive, you would consider ways to reduce those expenses by cutting your energy use. You would get rid of that SUV and buy a Smart car because it would finally occur to you that driving off the road 3 times a year isn't worth the $10K you are paying to do it. You would get rid of your 50 year old furnace (this is me we're talking about now) and buy an energy efficient modern one.
You would adjust your thermostat when you realized that 1 degree equals $25 a day.
Basically it would be a HUGE incentive to stop wasting energy. It would also be a HUGE incentive for alternative fuels to be developed.
UT is right that there would be insane inflation at first, but hopefully that would come down as everyone slowly retools their lives. Meanwhile, you aren't paying any income tax, so you have more money to pay for the huge price increases.
Only drawback I see is that poor people who don't pay much in income tax in the first place will have a really hard time of it. So there would have to be some way to deal with that.
Plus, once everyone has retoooled, the government would still need a tax base, so they would start income taxes again on top of the energy taxes.
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