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Environmental Consideration in Tax Policy Design

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  • John Whalley

    (Universities of Warwick and Western Ontario, and NBER)

Abstract

This paper discusses how environmental considerations will affect tax policy in the decades ahead. It argues that in the future, interactions between tax and environmental policy are likely to go well beyond recent discussion of double dividend issues and internalization of environmental externalities via tax policy will be the goal, which inevitably will involve the particular rather than the general. As a result, notions of neutrality which dominate current thinking on tax design will come under challenge; and in ways which will go well beyond current discussion of special treatment for particular goods and industries on environmental grounds. Special treatment of methods of production, more so than of goods, will be the name of the game. Moreover, the informational requirements of such an approach to tax policy are likely to be large. The paper concludes by pointing out that if environmental quality, as many suppose, is a luxury good with income elasticity of demand greater than one, then high income households will gain disproportionately from internalization of the externalities at issue. This may fuel pressures for more redistribution elsewhere in the tax system than is currently the case.

Suggested Citation

  • John Whalley, 1997. "Environmental Consideration in Tax Policy Design," EEPSEA Special and Technical Paper sp199701t2, Economy and Environment Program for Southeast Asia (EEPSEA), revised Jan 1997.
    • Handle: RePEc:eep:tpaper:sp199701t2
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    References listed on IDEAS

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    1. Browning, Edgar K, 1987. "On the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 77(1), pages 11-23, March.
    2. Stephen Smith, 1992. "Taxation and the environment: a survey," Fiscal Studies, Institute for Fiscal Studies, vol. 13(4), pages 21-57, January.
    3. Bovenberg, A.L. & Goulder, L.H., 1996. "Optimal environmental taxation in the presence of other taxes : General equilibrium analyses," Other publications TiSEM 5d4b7517-c5c8-4ef6-ab76-3, Tilburg University, School of Economics and Management.
    4. Browning, Edgar K, 1978. "The Burden of Taxation," Journal of Political Economy, University of Chicago Press, vol. 86(4), pages 649-671, August.
    5. Krutilla, Kerry & Viscusi, W Kip & Boyd, Roy, 1995. "Environmental Taxation for Environmental Regulation and Fiscal Policy: An Analysis of a Clinton-Type BTU Tax," Journal of Regulatory Economics, Springer, vol. 8(1), pages 5-22, July.
    6. Bovenberg, A Lans & Goulder, Lawrence H, 1996. "Optimal Environmental Taxation in the Presence of Other Taxes: General-Equilibrium Analyses," American Economic Review, American Economic Association, vol. 86(4), pages 985-1000, September.
    7. Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70(3), pages 215-215.
    8. Robert Repetto & Roger C. Dower & Robert Gramlich, 1993. "Pollution and Energy Taxes: Their Environmental and Economic Benefits," Challenge, Taylor & Francis Journals, vol. 36(4), pages 9-14, July.
    9. Mr. David C Nellor & Mr. Ronald T. McMorran, 1994. "Tax Policy and the Environment: Theory and Practice," IMF Working Papers 1994/106, International Monetary Fund.
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    Cited by:

    1. Perrings, Charles, 2014. "Environment and development economics 20 years on," Environment and Development Economics, Cambridge University Press, vol. 19(3), pages 333-366, June.

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