Present Use and Future PossibilitiesPA395 – Green TaxesJohn MejiaAir AirContaminantEmissions:What are environmental taxes?What are environmental taxes? To fiscal conservatives who want the smallest government possible – with the goal being no government at all – environmental taxes must seem like the last thing you want to have happen. If we take sales taxes or gas taxes as our point of reference, environmental taxes would appear an insane concept. “Are we to be taxed on the airwe breathe?” is a question that must come over the minds of these classical economic theorists. The reality, however, is quite different.Environmental taxes address the problems of pollution and are therefore a tax on the misuse of the environment rather than its use. Although the tax system may work well for theallocation of private property and resources, it is woefully inadequate for addressing issues dealing with the commons. As we have discussed in class, the commons are those things that we vouchsafe from the environment or society that we hold in common and that we pass along onto future generations. Examples include such common assets as minerals and timber on public land or radio waves.1 It is precisely because no one owns the commons that their theft has been thus far been ignored. For example, if I own cows and you make hamburgers out of my cows you have to pay me. Everyone conditioned in this “free” market capitalist society sees the logic in that. Now, who gets paid when I use clean air to combust materials in order for me to make my widgetand release polluted air back into the atmosphere? The answer, which was so self-evident in the previous example, now perplexes most economists. “No one” is what most classical economics gurus would say. But is that right? Clean air is something we all need and must have to survive. 1 Common_Assets.pdf (class resource)In first aid the rule of 5s is taught. Basically after five minutes without oxygen, or five days without water, or five weeks without food you die.2 But the affects of polluted water and pollutedair make one understand why there must be some system of accountability for the commons. Environmental Taxes: Durning and GoalsIf I pay taxes to support federal lands why are companies being subsidized to clear-cut the very same forests? If I am being sickened by the pollution of a coal power plant shouldn’t I be compensated? Environmental taxes begin to address the issue of the commons andof basic fairness. Our reading has provided two theories, which provide a matrix through which we can evaluate any environmental tax. In his book “Tax Shift” Durning proposes a set of criteria for categorizing environmental taxes: - Behavioral- Cost-Internalization- Revenue DrivenIn essence, behavioral taxes do what it sounds like they do – they are aimed at primarily changing behavior. This might be getting people to stop using lead paint by charging 10 times as much taxes on it than latex paint. Cost-Internalization taxes endeavor to add externalities back into the cost of products. These may be difficult to image in real world scenarios that involve a great many 2 Red Cross Training Workshop seminar, Northern New England Red Crossvariable but if we pare down a hypothetical example we get to a clear reasoning for these taxes. For instance, imagine that in order for me to make a single one of my widgets, I have to spill a gallon of oil on the sidewalk outside my factory. The city has to pay, with public funds, someone to clean up that spill, let’s say $100. Currently I sell my widget for $23. In order to internalize thecleanup externality the city must impose $100 tax on the sale of each widget. This example makes the obtuse terminology of “internalizing externalities” completely understandable to anyone. Now although a tax may primarily be meant to internalize costs they may also have a behavioral affect as well. At $23 I think widgets are a good investment but at $123 I can do without one. That means that these two environmental tax objectives are not usually mutually exclusive and in most cases are mutually inclusive. The last tax aim is simply to raise revenues for the government. Adding a $0.01/lb. of peanuts would not much affect peanut eating people’s behavior or internalize any external costs but in a pb & j crazed society it may give the government a valuable source of revenue. Environmental Taxes: Milne and EfficacyBy contrast Janet Milne’s “Environmental Taxes: An Introductory Primer” focusesnot on the intent of the tax but rather on its feasibility. Milne main thesis uses three points to evaluate any environmental tax:- Administrative Feasibility- Environmental Effectiveness- Political VisibilityAll three of these points are self-explanatory (unlike Durning’s terms). The only one that may need elucidation is the political visibility. Political visibility may work against the effectiveness of a tax if everyone who pays it decides not to re-elect the official who instituted it.3 Commonalities: EquityIn addition to these other points both Durning and Milne agree that the equity of atax is important. For example the feebate system described in Durning to retire junker cars by taxing them heavily and subsidizing more efficient cars overlooks the fact that people purchase junker cars because they simply can’t afford more efficient ones. In any case we must be cognizant of how equitably the cost is distributed throughout the entire population.Air Contaminant Fees in VTVermont fees on air emissions are much more sophisticated than most other states appear to be. Fees are charged for emissions only for individuals who emit more than 5 tons a year – although combustion of fuel in manufacturing processes and equipment are in most cases exempt. Charges on pollution are also delineated by their relative harmfulness. Short-term irritants are charged $0.008/lb, chronic systemic toxics are charged $0.084, low-potency emissions are charged $0.84/lb while high-potency emissions are charged $8.40/lb. In addition, an $800 fee is charged to anyone who produces 10 tons or more. 3 Class presentation of Janet MilneIn contrast, most federal guidelines like those administered by the EPA calculate their fees on $/ton! Also, many other states do not differentiate between pollutants on the basis oftheir toxicity – a flat rate is charged regardless of their deadliness. Now in terms of goals these taxes are used to fund
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