the problem is cars. Your average car requires around 10m2 of land just to sit idle. Once that car moves, it needs at least another 30m2+ for safe operation. Multiple that by 10 million people in a large city and it simply does not scale.
No. The problem is people, people living in cities. The more we get rid of the less pollution we have to deal with.
I, for one, think you're both wrong, although you (AC) are more wrong. You could solve most of the problems with cities by removing the cars and replacing them with something that makes more sense in a population-dense area. I often like to talk about PRT, the current poster child for which is Skytran. It might or might not ever make sense to extend PRT lines out of cities, but it absolutely makes sense within them.
However, most of the problems with cars can be mitigated. For example, if you ban large vehicles from city centers, you can use smaller and less durable vehicles to move around within them. If the vehicles are electric then you eliminate a lot of the wasted energy. Even gasoline cars commonly don't idle any more, and if you drive them gently then you may not even notice start-stop. Mild hybrid systems are going to positively proliferate in the next few years, because suppliers have got complete packages worked out that they'd just love to sell to automakers looking for ways to meet emissions standards; not only in the US and the EU, but also in China which is actually instituting some pretty tough rules. And as batteries continue to come down in price, EVs will continue to become more common.
We should impose a 10-20% tax for living or working in cities nationwide as a disincentive.
Cities can be highly efficient, if people both live and work there. If you want them to be efficient, though, you will have to make them even more dense. There has to be enough housing at an affordable price for workers to live in the city. And you have to find some way to make it available to them, and not someone else who just thinks it would be cool to live in the city, or to have an apartment there while they're slumming.