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Why Have Separate Environmental Taxes?

In: Tax Policy and the Economy, Volume 10

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  • Don Fullerton

Abstract

Each environmental tax in the U.S. is designed to collect revenue for a trust fund used to clean up a particular pollution problem. Each might be intended to collect from a particular industry thought to be responsible for that pollution problem, but none represents a good example of an incentive-based tax designed to discourage the polluting activity itself. A different tax for each trust fund means that each tax rate is typically less than one percent. But each separate tax has an extra cost of administration and compliance, since taxpayers must read another set of rules and fill out another set of forms. This paper provides evidence on compliance costs that are high relative to the small revenue from each separate tax. In addition, an input-output model is used to show how current U.S. environmental tax burdens are passed from taxed industries to all other industries. Thus the extra cost incurred to administer each separate tax achieves neither targeted incentives not targeted burdens.

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This chapter was published in:

  • James M. Poterba, 1996. "Tax Policy and the Economy, Volume 10," NBER Books, National Bureau of Economic Research, Inc, number pote96-1.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 10898.

    Handle: RePEc:nbr:nberch:10898

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    1. Don Fullerton & Thomas C. Kinnaman, 1993. "Garbage, Recycling, and Illicit Burning or Dumping," NBER Working Papers 4374, National Bureau of Economic Research, Inc.
    2. Douglas W. McNiel & Andrew W. Foshee, 1988. "Superfund Financing Alternatives," Review of Policy Research, Policy Studies Organization, vol. 7(4), pages 751-760, 06.
    3. Thomas A. Barthold, 1994. "Issues in the Design of Environmental Excise Taxes," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 133-151, Winter.
    4. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-51, September.
    5. Joel Slemrod & Nikki Sorum, 1985. "The Compliance Cost of the U.S. Individual Income Tax System," NBER Working Papers 1401, National Bureau of Economic Research, Inc.
    6. Kotlikoff, Laurence J. & Summers, Lawrence H., 1987. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 16, pages 1043-1092 Elsevier.
    7. James Poterba & Julio Rotemberg, 1995. "Environmental taxes on intermediate and final goods when both can be imported," International Tax and Public Finance, Springer, vol. 2(2), pages 221-228, August.
    8. Michael L. Katz & Harvey S. Rosen, 1983. "Tax Analysis in an Oligopoly Model," NBER Working Papers 1088, National Bureau of Economic Research, Inc.
    9. Bohm, Peter & Russell, Clifford S., 1985. "Comparative analysis of alternative policy instruments," Handbook of Natural Resource and Energy Economics, in: A. V. Kneeseā€  & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 1, chapter 10, pages 395-460 Elsevier.
    10. Don Fullerton & Seng-Su Tsang, 1993. "Environmental Costs Paid by the Polluter or the Beneficiary? The Case of CERCLA and Superfund," NBER Working Papers 4418, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Don Fullerton & Ann Wolverton, 1997. "The Case for a Two-Part Instrument: Presumptive Tax and Environmental Subsidy," NBER Working Papers 5993, National Bureau of Economic Research, Inc.
    2. Thomas Sadler, 2001. "Environmental taxation in an optimal tax framework," Atlantic Economic Journal, International Atlantic Economic Society, vol. 29(2), pages 215-231, June.
    3. Sjak Smulders & Herman R. J. Vollebergh, 2001. "Green Taxes and Administrative Costs: The Case of Carbon Taxation," NBER Chapters, in: Behavioral and Distributional Effects of Environmental Policy, pages 91-130 National Bureau of Economic Research, Inc.
    4. Brett, Craig & Keen, Michael, 2000. "Political uncertainty and the earmarking of environmental taxes," Journal of Public Economics, Elsevier, vol. 75(3), pages 315-340, March.
    5. Richard Bird & Joosung Jun, 2005. "Earmarking in Theory and Korean Practice," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0515, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    6. Don Fullerton & Inkee Hong & Gilbert E. Metcalf, 1999. "A Tax on Output of the Polluting Industry is Not a Tax on Pollution: The Importance of Hitting the Target," NBER Working Papers 7259, National Bureau of Economic Research, Inc.
    7. James R. Hines Jr., 2007. "Taxing Consumption and Other Sins," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 49-68, Winter.
    8. Gilbert E. Metcalf, 2005. "Tax Reform and Environmental Taxation," Discussion Papers Series, Department of Economics, Tufts University 0519, Department of Economics, Tufts University.
    9. Raghbendra Jha, 2004. "Innovative Sources of Development Finance: Global Cooperation in the Twenty-first Century," The World Economy, Wiley Blackwell, vol. 27(2), pages 193-214, 02.
    10. Hilary Sigman, 2003. "Taxing Hazardous Waste: The U.S. Experience," Departmental Working Papers 200306, Rutgers University, Department of Economics.

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