02 June 2011

Anti-pollution taxes

The Economist: Free Exchange | R.A. | Taxing the bad stuff

Also at Ezra Klein's place, Brad Plumer writes an excellent post summarising a new IMF paper on environmental taxation. It includes this telling graph:

Among OECD members, America does the worst at raising revenue through taxes designed to discourage pollution. I suspect that a big part of this is due to America's remarkably low petrol tax, but that in itself is worth noting. Ideally, one would like to tax bad things rather than good things, and pollution is a bad thing. In a country that dislikes income taxes and frets over its deficit, a bigger role for environmental taxes, including a carbon tax, seems like a no-brainer. Unfortunately, America's politicians have failed to come up with an effective way to sell the idea.
I'm definitely in favor of "taxing the bad stuff," or at least "stuff we want people to do less," to take less of a judgmental stance.  (*Ahem* we should be taxes consumption not saving and earning *ahhhrrrrrrrm*.  Excuse me.)

But be careful with this chart. Note that the y-axis is "percent of total tax revenue" attributable to pigovian pollution taxes. There are two ways less obvious ways America could push itself further to the right in this chart, and I don't think most people who want to tax pollution more would like either.

The first is to cut other taxes. If we had a lower corporate income taxes, like, say, every single other country on this list, America would have a higher proportion of tax revenue from anti-pollution taxes.

The other is to loosen environmental controls and then tax the formerly prohibited actions. Much of the US's environmental policy is very top down, mandating exactly the sorts of devices and techniques and processes that must be used to control pollution. We would raise more revenue anti-pollution if, for instance, we taxed vehicles on any NOx emissions over a certain standard rather than refusing to license those vehicles period.

I'd be fine with both of those things, but I doubt many other people who worry our anti-pollution taxes are too low would be.

1 comment:

  1. Anti pollution taxes should basically be more imparted of the industries causing pollution. Certain measures should be taken to overcome this hazard.