Sunday, September 30, 2007

The Tax Shift

The Tax Shift

An emerging methodology in the effort to encourage environmentally friendly business practices is the attempt to implement incentives in the tax code. Environmentalists want to modify the tax code in a way that would provide incentives by allowing participants to avoid taxation. The idea is that the current tax code is flawed as it allows for business to pass their pollution expenses on to the taxpayer. One example of this occurrence is the Exxon Valdez oil spill of 1989 in which millions of gallons were spilled in the Prince William Sound. Exxon paid a $1 billion settlement for the damages but the tax code allowed them to deduct the loss as a business expense, passing $250 million of the cleanup costs to the taxpayers. Other examples include the mining and timber industries ability to secure sizeable tax breaks for their specific practices and shift costs in the same manner as Exxon. The tax shift proposal seeks not to abolish these tax code practices but to reform it in a way that allows companies to enjoy tax benefits for their environmental awareness. Furthermore, tax shift ideals include a number of corrective taxes and emphasize the need for the government to act as a corrective state and heavily regulate pollution. This excerpt from the article reveals how much emphasis is placed on corrective taxation in the tax shift proposal.

“New and progressively-graduated taxes could shift 10 percent of the federal tax burden in the next 10 to 20 years. As defined by Alan Thein Durning and Yoram Bauman in their book Tax Shift, and by Redefining Progress in Tax Waste, Not Work, the levies could include: Carbon taxes to decrease the generation of greenhouse gases threatening worldwide climatic change. Governments could impose a tax--say, $50 per ton of carbon emissions--or combine a smaller tax with user fees or revenues from the sale of pollution permits;

Pollution taxes to reduce the contaminants flowing into our rivers and streams, filling our landfills and eroding the quality of our soil. There are an estimated 250 human-made chemicals harbored in the living tissue of the average American;

Point source taxes to reduce pollutants pouring forth from the outflow pipes and smokestacks of sewage treatment plants, factories and incinerators;

Traffic taxes in the form of tolls imposed strictly during rush-hour congestion periods, could promote the use of carpools and mass-transit, as well as flextime work hours;

Higher use fees for resources owned by the public, such as grazing or mining that occurs on public lands.

Tax incentives would be offered to invest in energy efficiency and technological improvements. For example, a system of new taxes and permits may dramatically reduce global warming gases and non-point source pollution, which is toxic runoff into rivers and streams. Taxes could be levied on development resulting in loss of biodiversity in wilderness areas. Other new taxes, some of which have already been proposed on the state level (see sidebar), are levies on carbon dioxide emissions and gasoline, taxes on pollutants, taxes on virgin materials and increased fees for using public resources.

Advocates of the tax shift have opted for the corrective route rather than embracing Coase’s ideals. Looking to tax breaks for environmentally conscious business practices and corrective taxes for polluting activities. Coase’s ideas of private resolution through negotiation seem to have been discarded entirely by the tax shift ideology. At the national level, and certainly when dealing with greed stricken corporate entities, it seems this method might be the best way to regulate pollution generated by big business. Private negotiation just might not work with Exxon Mobil and the small hotel down the river so why not try and provide Exxon with tax based incentives to avoid pollution? If the tax breaks are substantial, and I think they would have to be, I suspect that in the interest of profits they’ll make every attempt to procure them.
Jordan Ford

Sharing the Wealth
If We Shift the Tax Burden From Work to Waste, Everyone Benefits

by Brian Dunkiel, M. Jeff Hamond, and Jim Motavalli

1 comment:

Larry Eubanks said...

"Tax incentives" sound like subsidies to me. Do you think the suggested subsidies might aim to correct market failures?

"Greed stricken," eh? How do you define greed?