Doyou reconcile the introduction of environmental-based tax rate differentiationas well as new environmental taxes with the traditional objectives of fiscalreform: tax simplification, fiscal neutrality (not affecting behavior)? A1. Thishas to be done very carefully, as introducing new taxes that are related to theenvironment, can dramatically affect peoples behavior. If you levy new taxeson vehicles that produce high amount of pollution, like Sport Utility vehiclespeople are no longer going to purchase those vehicles. This tax is somethingthat has to be eased on to the public and the public has to be educated as tohow these environmental taxes will work.
The bottom line is that the publicneeds to be educated as to why these taxes are being levied. Q2. With theexception of a lump-sum tax, all conventional taxes have distortion cost in theform of affecting the taxpayers economic behavior: work-leisure choice,consumption-savings allocation, etc. Wouldnt environmental taxes have thesame dead weight loss by affecting consumption and production behavior? A2.
These taxes would not be a dead weight loss because after the public waseducated, I believe that they would be aware the there was considerableenvironmental benefit involved with these new taxes.
They also might make peoplethink twice before polluting the environment, because they may realize that theend result is that they are paying to clean it up. Q3. What is thedistributional incidence of environmental taxes? Or, Who benefits and who losesfrom specific taxes, how can distributional concerns, a major constraint to theacceptability of environmental taxes, be addressed in a satisfactory way? A3.
The general public are those who will benefit from these new taxes, due to thefact that pollution will be reduced and the environment will become cleaner anda better place to live. This tax also improves income distribution, and will bedistributed proportionally across the board. It will also improve theenvironment by saving money and realigning polices that are setup as anincentive to practice environmentally sound practices. This is set up to improveeconomic efficiency and reduce waste that is produced by public and stateenterprise. The distributional cost will be addressed through a proportionallydistributed tax, and not a disproportion tax that benefit the rich. Q4. How doyou address International competitiveness concerns raised by industry withregard to (unilateral) Introduction of environmental taxes? A4. This should behandled very carefully, if taxes are introduced unilaterally, this could riskpricing itself out of the market. The reason for this is if the taxes were todramatic, companies may take their industry, and plants outside of the country,thus loosing millions in other types of tax revenue, jobs and other economicwell being. Q5. At what level should taxes on particular products be set inorder to reflect the environmental costs associated with their production anduse? A5. Tax levels should be set so that they dont exceed a certainpercentage of the cost of the product. If there are situations in which theproducts environmental cost would be higher than the cost of the product, thereshould 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 onpollution, while at the same time, not making them so expensive so that thespecified product is priced out of the market, reducing demand, forcingconsumers to seek a substitute product. Q8. What is the preferred type ofenvironmental Taxes? What determines the choice between direct taxes (onemissions) and indirect taxes (on products and inputs)? A8. The preferred tax isa direct tax which typical which will affect industry, and consumers dependingon their income and amount that the pollute. Indirect taxes are unfavorablebecause 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 moneyon in relation to those who are wealthier. The government when implementingtaxes determines, how much revenue needs to be created, and how they me obtainthe most exposure to pay for the tax. For example those who use The Mass Pikeare taxed by paying the tolls. This doesnt cover the entire cost of operatingthe highway system, but subsidizes the operating cost. Q10. What is thedifference between taxes and charges? Under what conditions are environmentaltaxes and charges identical? Which do you feel is politically more acceptable?A10. The difference between taxes and charges is that the charges were set upafter the damage was done, and the tax was setup to correct the problem that thepollution created along the way. The wanted to charge the farmers for water, butothers said that they couldnt afford it. Taxes and charges are very similarin the way they work they are both there to curve pollution and to correct itafter it occurs. Q12. How do you make the introduction of environmental taxessocially and politically more acceptable? How do you ensure public and politicalsupport? In other Words, How might environmental taxes be introduced with theminimal amount of resistance and disruption? A12. These environmental taxes mustbe slowly introduced to the people, through billboards, commercials andeditorials that describe the condition of the environment, The after this hasbeen established these can be followed by a campaign on how to reduce pollutionand increase the well-being of the environment. This campaign can be the basefor the introduction of the new taxes. Once people know of the state of theeconomy, they may be more willing to accept these new taxes. Q14. Is there astrong case for earmarking environmental tax revenues for environmentalexpenditures under what circumstances? If environmental taxes are introduced asincentive systems (rather than as revenue raising mechanisms) shouldntenvironmental investments are financed by general tax revenue? What are theusual 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 allocatedand dispersed to help remedy the environmental problems. This general revenueshould finance them so that these problems will be fixed and at the same timethe amount of pollution will decrease because people will not want to pay thisenvironmental tax. They felt that the fiscal and environmental tax revenue wasbeing wasted, they were dumping this money in to the system with no change, andthere were no new innovative ideas. Everyone was only concerned with theirsector, and was happy with the continuation of status quo.
Cite this Environmental Taxes
Environmental Taxes. (2019, Jan 29). Retrieved from https://graduateway.com/environmental-taxes/