Environmental Taxes

     Do you reconcile the introduction of environmental-based tax rate differentiation
as well as new environmental taxes with the traditional objectives of fiscal
reform: tax simplification, fiscal neutrality (not affecting behavior)? A1. This
has to be done very carefully, as introducing new taxes that are related to the
environment, can dramatically affect people’s behavior. If you levy new taxes
on vehicles that produce high amount of pollution, like Sport Utility vehicles
people are no longer going to purchase those vehicles. This tax is something
that has to be eased on to the public and the public has to be educated as to
how these environmental taxes will work. The bottom line is that the public
needs to be educated as to why these taxes are being levied. Q2. With the
exception of a lump-sum tax, all conventional taxes have distortion cost in the
form of affecting the taxpayer’s economic behavior: work-leisure choice,
consumption-savings allocation, etc. Wouldn’t environmental taxes have the
same dead weight loss by affecting consumption and production behavior? A2.

These taxes would not be a dead weight loss because after the public was
educated, I believe that they would be aware the there was considerable
environmental benefit involved with these new taxes. They also might make people
think twice before polluting the environment, because they may realize that the
end result is that they are paying to clean it up. Q3. What is the
distributional incidence of environmental taxes? Or, Who benefits and who loses
from specific taxes, how can distributional concerns, a major constraint to the
acceptability of environmental taxes, be addressed in a satisfactory way? A3.

The general public are those who will benefit from these new taxes, due to the
fact that pollution will be reduced and the environment will become cleaner and
a better place to live. This tax also improves income distribution, and will be
distributed proportionally across the board. It will also improve the
environment by saving money and realigning polices that are setup as an
incentive to practice environmentally sound practices. This is set up to improve
economic efficiency and reduce waste that is produced by public and state
enterprise. The distributional cost will be addressed through a proportionally
distributed tax, and not a disproportion tax that benefit the rich. Q4. How do
you address International competitiveness concerns raised by industry with
regard to (unilateral) Introduction of environmental taxes? A4. This should be
handled very carefully, if taxes are introduced unilaterally, this could risk
pricing itself out of the market. The reason for this is if the taxes were to
dramatic, companies may take their industry, and plants outside of the country,
thus loosing millions in other types of tax revenue, jobs and other economic
well being. Q5. At what level should taxes on particular products be set in
order to reflect the environmental costs associated with their production and
use? A5. Tax levels should be set so that they don’t exceed a certain
percentage of the cost of the product. If there are situations in which the
products environmental cost would be higher than the cost of the product, there
should be some type of tax ceiling; a fair figure would probably be around 25%
of the cost. These levels should be set in order to maintain control on
pollution, while at the same time, not making them so expensive so that the
specified product is priced out of the market, reducing demand, forcing
consumers to seek a substitute product. Q8. What is the preferred type of
environmental Taxes? What determines the choice between direct taxes (on
emissions) and indirect taxes (on products and inputs)? A8. The preferred tax is
a direct tax which typical which will affect industry, and consumers depending
on their income and amount that the pollute. Indirect taxes are unfavorable
because they put a tax burden on products such as food clothing and shelter,
which are the commodities that the poor spend a higher percentage of their money
on in relation to those who are wealthier. The government when implementing
taxes determines, how much revenue needs to be created, and how they me obtain
the most exposure to pay for the tax. For example those who use The Mass Pike
are taxed by paying the tolls. This doesn’t cover the entire cost of operating
the highway system, but subsidizes the operating cost. Q10. What is the
difference between taxes and charges? Under what conditions are environmental
taxes and charges identical? Which do you feel is politically more acceptable?

A10. The difference between taxes and charges is that the charges were set up
after the damage was done, and the tax was setup to correct the problem that the
pollution created along the way. The wanted to charge the farmers for water, but
others said that they couldn’t afford it. Taxes and charges are very similar
in the way they work they are both there to curve pollution and to correct it
after it occurs. Q12. How do you make the introduction of environmental taxes
socially and politically more acceptable? How do you ensure public and political
support? In other Words, How might environmental taxes be introduced with the
minimal amount of resistance and disruption? A12. These environmental taxes must
be slowly introduced to the people, through billboards, commercials and
editorials that describe the condition of the environment, The after this has
been established these can be followed by a campaign on how to reduce pollution
and increase the well-being of the environment. This campaign can be the base
for the introduction of the new taxes. Once people know of the state of the
economy, they may be more willing to accept these new taxes. Q14. Is there a
strong case for earmarking environmental tax revenues for environmental
expenditures under what circumstances? If environmental taxes are introduced as
incentive systems (rather than as revenue raising mechanisms) shouldn’t
environmental investments are financed by general tax revenue? What are the
usual reasons for objecting to earmarking the Finance Minister Alluded to? A14.

In this case tax revenues should be spent to correct the environmental problems,
the nightly brown outs are not acceptable. This tax revenue should be allocated
and dispersed to help remedy the environmental problems. This general revenue
should finance them so that these problems will be fixed and at the same time
the amount of pollution will decrease because people will not want to pay this
environmental tax. They felt that the fiscal and environmental tax revenue was
being wasted, they were dumping this money in to the system with no change, and
there were no new innovative ideas. Everyone was only concerned with their
sector, and was happy with the continuation of status quo.