Using non-renewable resources and engaging in activities that cause pollution, create costs (negative externalities) that society must bear. For example, when you drive and burn gasoline, you use up a resource, cause air pollution and damage the road and environment. The price you pay for the car and the gasoline do not include these costs. One way to address these costs is to use "polluter pays" or "resource user pays" taxes.
For example, the gasoline tax could be increased to cover such costs. Taxes could be added to utility bills. Taxes could be added to the use of bottles and bags.
There are many such proposals. Some call for the taxes to be used for general fund purposes, others promote a "tax shift" where the new taxse would enable other taxes, such as income taxes, to be reduced. For example, the non-profit organization - Redefining Progress, has advocated for some time to "tax waste, not work." A 12/09 post in Business Financial News summarizes examples of polluter pays taxes used outside of the US (Tax Shifting And Environmental Economics).
What do you think? Do you think the US should enact a polluter pays tax or taxes? If no, why not? If yes, why and what specific tax or taxes would you propose? How do the principles of equity, economic growth and efficiency and minimum tax gap apply to such taxes?
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I would strongly support the proposal that a polluter pays tax or taxes. This makes sense according to the Polluter-Pays Principle (PPP), also known as Extended Polluter Responsibility (ERP) that has been adopted internationally. Under this principle, the polluters are responsible for the damages caused to the environment because of their acts. By making the polluters liable, the government shifts its responsibility for dealing with the consequences of environmental pollution to the parties that cause it. However, because the costs of mitigating environmental damages can be enormous that polluting parties alone cannot bear, these costs are passed along to consumers in form of higher prices [http://hubpages.com/hub/Polluter-pays-principle].
The polluter taxes should be imposed on non-renewable natural resources such as coal, petroleum, natural gas and nuclear power. The taxes can also be imposed on renewable natural resources such as timber, overfishing to a certain degree because if not used sustainably, these resources will run out faster than they are harvested or reproduced [http://en.wikipedia.org/wiki/Non-renewable_resource]. Although the taxes are already imposed on gasoline, gas, and electricity etc, raising the taxes higher once consumption exceeds a necessary average level will make people consume less because using more of these resources is more costly to them. The tax on tobacco should also be raised because of the impact of second-hand smoke to the environment and other people’s health. A tax on plastic bottles or metal cans can also be increased to discourage people from consuming more of these products or encourage them to recycle at proper recycling centers instead of at landfills.
From the equity standpoint, it is justified that these consumers have to pay a higher price because they are the ones who create demand for the products or services that cause environmental damages. If the government is to bear this cost, it would have to take it from all taxpayers’ money. It would be unfair for those who may not buy products or used services from these polluters. From the economic growth and efficiency standpoint, the higher taxes on natural resource usage would cause manufacturers/producers to come up with better alternatives and technologies to keep the usage of natural resource at a minimum level. The development of hybrid cars, use of solar energy, wind and wave power are among many new technologies that are considered alternative sources of energy because they are renewable. It is no doubt that the economy will benefit from these developments and efficiency in manufacturing and producing will be improved.
With regards to the minimum tax gap principle, it is very difficult to quantify the true costs of environmental damages because it is not visible now but will be in the long-run. The indirect impact may not be known until occurred. Therefore, the additional taxes imposed may or may not be enough to cover the costs. A thorough and comprehensive study of the impacts to the environment is necessary to come up with a reasonable estimate of costs but that involves time, expertise, human and financial resources which can be costly to the government. The goal of minimizing the tax gap therefore may not be sustainable at a large scale. However, at a smaller scale, the increase in excise tax rates can allow the government to reasonably estimate how much additional revenue will be raised.
Taxing polluters is certainly an attempt to help the environment however we must also look at its effectiveness in reducing the pollution.
While I agree that some action should be taken on pollution, I do not think that taxing polluters is the right way to go.
Taxing polluters violates the principle of neutrality justifiably, to make the polluter look for alternative sources. The first issue is to determine who is the polluter and who is going to be taxed. Is it the industry or the final consumers. It is more likely that the industries are going to be taxed because it is simpler to collect from them.
However, it is not likely that the polluters will take full brunt of the tax and change their ways. Eventually, the cost will be passed down to the final consumers and this questions the effectiveness of the tax. If the polluters simply pass the cost of the tax onto the consumers will they ever look for a cleaner source of energy?
A polluter tax fails the principle of equity because although similarly situated taxpayers will be taxed similarly assuming a fixed rate, but because of the taxes regressivity people who are able to pay more will not and people who cannot pay will face the burden.
It also fails the economic growth principle, because new business would avoid entering the state where the tax will be implemented and existing business will have an additional cost of looking for alternative sources while paying for the tax.
It passes the minimum tax gap if it can be assumed that the polluters will pass on the tax to the consumers and pass on the collection to the government. If it is treated similar to a sales tax, the consumers cannot avoid it and business will pay a stiff penalty for avoiding payment.
As the disastrous oil gusher currently ruining the health of the Gulf of Mexico approaches the Mississippi River basin one is reminded of the already present seasonal dead zone (see link (1) below) caused by the runoff from excessive use of (nitrogen rich) fertilizer. It is estimated that "20% of nitrogen applied to fields [...ends] up in lakes and coastal waterways via runoff and drainage" (see link (2) below, page 5 of the full tax policy brief). The dead zone was once rich in sea life such as oysters and shrimp--a valuable food chain link and natural national treasure.
Pollution on this scale is not isolated. It runs downhill, or in this case--down river, affecting us all. The adverse effects infect the physical and economical health of our society. We pay a price in one way or another--be it through (just two examples) higher prices for scarcer food supplies and increased health/medical costs for treatment of pollution linked diseases. We should enact policies that reflect the true costs of economic activity. One way to do so is through the tax code.
An appropriate tax levied on fertilizer would discourage wasteful overuse. The increased costs would encourage proper use with minimal affect on the ultimate price of farm products. After all, it is the wasteful use that would be curtailed; thus, per unit production costs would remain roughly the same.
Just two positive side effects would be a healthier river basin capable of sustaining sea life thus increasing supply, spurring the economic re-birth of the area's fishing industry, and generating a more than $3 billion flow of much needed tax revenue (see link (2)).
Furthermore, on a "good tax policy" basis, a nitrogen tax is easily collected at the point of sale with minimal non-compliance (no increase to the tax gap). It is equitable in that the costs and perhaps more importantly, the savings, are borne by all consumers. It is also likely to have ancillary economic benefits as well. Commercial and sports fishing would increase in the basin; Eco-friendly tourism and its concomitant suport industries would flourish.
This is but one example of the positive effects that intelligent, efficient and equitable polluter taxes could engender.
What are we waiting for? Of course the US should enact polluter taxes.
(1) http://www.nasa.gov/vision/earth/environment/dead_zone.html
(2) http://www.brookings.edu/papers/2006/04environment_hanson.aspx
If we consider it is our responsibility and duty to protect and conserve the non-renewable resources and life at its best on Earth for generations to come, YES, we need to do something against pollution, because it is a big factor in the climate change we see and live today. In US the gasoline price does not include pollution or road usage taxes, but the question is: would the existence of a polluter tax change our behavior? Would we carpool more or use public transportation in order to avoid it?
Maybe not.
For a low income person who cannot afford paying the tax but is willing to look for alternatives, the lack of public transportation in his area or the impossibility of carpooling would transform the tax into an unreasonable fine.
Before considering the tax, we need to create alternatives.
A Polluter tax would not be progressive, ignoring the principle of equity and fairness; a person with a greater ability to pay would not be taxed more, because in many cases, he would be able to invest in hybrid cars, for example, and pay less taxes.
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